Will house prices keep falling in 2024?

House prices are down 1.2% according to the latest official figures, with the average home now £4,000 cheaper than the most recent peak. We explore where house prices could head in 2024.

The UK property market is struggling as mortgage rates, rents and the cost of living overall rise. House prices began slowing down in July, and now actual falls are being recorded.

The latest official figures from the ONS show prices down 1.2% in the year to October. Nationwide reported a drop of 2% in the year to November while Halifax’s data shows a drop of 1% for the same period.

The market’s recent fall is being attributed to soaring interest rates making mortgage costs rise, and forcing sellers to cut their prices to ensure a sale. The average two-year fixed mortgage rate has jumped from around 2.3% in 2021 to 5.95% today, though this is lower than a few months ago.

In this article, we explain:

Read more: Will UK mortgage rates go down in 2024?

Are house prices going down?

The short answer is yes; over the past year, property prices are down. The latest ONS figures show the average house now costs £288,000, down from £292,049 in August and £281,193 in the same month last year.

However, despite recent trends, house prices are significantly up compared to before the pandemic. In February 202, the average home cost just £230,609 – more than £50,000 less than today.

Falls in house prices and the number of sales have been attributed to a mixture of high mortgage rates, cost of living pressures and low market confidence.

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Why are house prices so high?

House prices are still very high by historical standards and have been rising much faster than wages.

The average price of a UK home has nearly trebled since the turn of the century and increased by more than 60% over the last decade according to Nationwide building society.

A shortage of housing stock and high demand for properties has certainly inflated prices. But a significant factor has been the low interest rates since the financial crash.

People were more able to afford mortgages because borrowing money was cheap. This is no longer the case.

Bank of England has increased the base rate 14 times from its record low of 0.1% in December 2021. The base interest rate now sits at 5.25%. As a result mortgage rates have shot up.

You can read more about why the central bank has been raising rates.

Will house prices crash in 2024?

While we can’t say for sure what the future holds, recent rises in mortgage rates combined with the cost of living crisis have sparked fears that the market might crash. High fuel prices, energy costs and tax rises have put pressure on household budgets.

Here are various predictions for how house prices will change in 2024:

• Estate agent Savills predicts that UK property prices will fall by 3% in 2024, before recovering in 2025 and rising by 3.5%
• Lloyds Bank, the country’s largest mortgage lender, has forecast a 4.7% fall in average property prices over 2023, and a further 2.4% decrease over 2024. It expects prices to then recover slightly in 2025
• Estate agent Knight Frank expects house prices to fall by 4% in 2024
• Property website Zoopla is more conservative with its forecast, estimating that house prices will fall by just 2% over 2024

Interest rates may begin to fall soon, which could drive house prices up

In its latest meeting, the Bank of England opted to hold the base rate at its current level of 5.25%. But inflation is falling faster than predicted. This could mean interest rates follow soon after.

“We expect mortgage rates to fall slowly in the coming months,” said a spokesperson for Zoopla. “Once they get below 4.5%, we’ll see more buyers return to the housing market.” But with the average two-year fixed-rate mortgage currently at approximately 5.95%, this could take some time.

But that’s not to say property prices will crash; demand still tends to outstrip supply of homes in many areas across the UK. Plus, wages are rising even faster than inflation. Mortgage rates are also falling, meaning buyers are returning to the market. This means prices could fall rather than crash.

“Based on our current economic assumptions, we anticipate a gradual rather than a precipitous decline [in house prices],” said Kim Kinnaird, a mortgage director at Halifax.

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How are mortgage rates affecting house prices?

Higher mortgage rates are making it more expensive to get a mortgage to buy a home. The extra financial pressure on buyers is forcing sellers to re-evaluate their asking prices if they want to make a sale.

There are a number of factors that could see house prices fall:

The Resolution Foundation think tank has said that if interest rates remain at the current high level then average house prices could plunge by 25%. This would take the average house price from £288,000 today to nearer £216,000.

However, the Bank of England decided not to raise the base interest rates since August, and with no meeting planned in January, it means they will stay at 5.25% until February.

The Resolution Foundation believes the adverse effects of the successive rate rises have yet to be fully felt, particularly by mortgage holders whose fixed-term deals come to an end over the coming months.

Read more: Is now a good time to buy a house?

What are the regional variations in house prices?

There are differences in house price movement depending on where you live within the UK, with one region even seeing rises.

Here are the latest regional house price figures from the ONS:

• North East: +0.2%
• West Midlands: -0.3%
• North West: -0.4%
• South West: -0.6%
• Yorkshire and the Humber: -1.2%
• East Midlands: -1.7%
• South East: -2%
• East: -2.3%
• London: -3.6%

London’s house prices remain the most expensive in the UK at £516,000 in October 2023, despite recent falls.

By contrast, the North East has the lowest average house price of all English regions at £161,000 – and is the only place prices haven’t fallen in the past 12 months.

House prices are also dropping in Wales and Scotland, according to Land Registry data, however figures for Northern Ireland are only released every three months – so updates won’t be available until February the ONS said.

How do prices differ for different types of property?

The pandemic caused huge shifts in housing preferences and mortgage lenders have continued to see differences in price trends between property types.

Since the onset of the pandemic, prices of detached, family homes are growing much faster than flats.

Many workers are continuing to work from home a few days a week, so there is still demand for larger properties with space for a home office. While this hybrid model for working continues, so will the trend for larger properties.

Figures from Nationwide Building Society of average asking prices between 2020 and 2022 showed:

• A detached property increased by 26%, or nearly £78,000
• Flats increased by 13.4% on average, or £23,000

Figures from the Office for National Statistics show a slightly different trend, with semi-detached and terraced houses rising in price the most.

Read more: Cheapest places to buy a house in the UK

Is there a greater demand for rural locations?

With working from home a more permanent part of many people’s lives, demand for properties outside cities has jumped.

Lockdowns highlighted the value of greenery and space, triggering a surge of interest in properties in rural and coastal areas, according to ONS statistics.

House prices in some hotspots have risen at three times the national rate. These include places such as:

• Conwy in North Wales
• North Devon
• Richmondshire in the Yorkshire Dales

Estate agents report significant interest in rural and remote properties in Scotland.

With that said, some people have started to return to cities and commuter belts, which has driven up the average price of properties in these areas.

Looking for a broker? We list the best mortgage brokers in the UK

Read more: Is now a good time to buy a house? We help you weigh up the pros and cons.