Several factors could contribute to a resurgence in the UK housing market in 2024:
Mortgage Pricing War and Interest Rate Cuts:
A mortgage pricing war and anticipated Bank of England interest rate cuts could rejuvenate the UK housing market. Lower mortgage rates make home buying more affordable, potentially stimulating demand. However, the decision by the Bank of England to hold rates at 5.25% (1 Feb 2024) brings uncertainty to the future path of rates for the remainder of the year.
The possibility of a general election in 2024 could impact the housing market. If the election is scheduled for later in the year, it could invigorate the housing market in the spring.
Housing Policy Evolution:
The adaptation of housing policy to better reflect the economic, demographic, and social realities in the UK could stimulate the housing market. This includes support for the 'build-to-rent' sector, which has seen growing demand due to high mortgage costs and changes in consumer lifestyles. This could lead to the emergence of more large-scale, multi-tenure residential schemes. The new-build market in the UK is under significant pressure to expand exponentially due to the highlighted pressures on social and government housing for families under the cost-of-living crisis and the building asylum/refugee housing situation.
Demand Outstripping Supply:
With an estimated demand of some 230,000 new homes per annum needed in 2019 pre-Covid, this figure is now estimated to be over 350,000 per annum just to keep pace with demand. Currently, less than 50% of this target is being met. This will likely result in lenders needing to support the new-build market again, with signs of this already being seen as lenders relax their property lending criteria.
Return of Confidence:
After a year of sustained price falls in 2023, returning confidence could stimulate the housing market. This is indicated by a succession of unexpected monthly rises in the past three months and a larger-than-expected pick-up in activity.
Increased Demand for Private Rented Housing:
High mortgage costs and increased costs of living have led to growing demand for private rented housing. This could stimulate the 'build-to-rent' sector and lead to the emergence of more large-scale, multi-tenure residential schemes.
So is now a good time to buy?
The factors identified in this post suggest that there are a number of reasons to be optimistic about the path of house prices in 2024.
If you’re an expat or overseas resident considering a house purchase in the UK, IMS is here to help. Visit mortgageims.com/services/ for more details