The UK housing market has returned to its pre-pandemic size in the year to March 2024, analysis from Savills has found.
Savills found the total value of the UK housing market contracted by 21 per cent in the year to March 2024, spurred by lower levels of market activity.
This has taken it back to its pre-pandemic size of £342bn, down from the height of the mini housing market boom which temporarily peaked at £521bn.
However, Savills pointed out that, while the UK housing market is now the same size as it was pre-pandemic, its make-up looks quite different.
It explained that, overall, there were 15 per cent fewer completed transactions compared with the year to March 2020, but this was offset by 1 per cent higher average sale prices.
Savills head of UK residential research, Lucian Cook, said: “The contraction of the market primarily reflects the impact that the higher costs of mortgages have had on the appetite of buyers to take in more debt.”
He pointed out that mortgaged home movers and buy-to-let investors have been “particularly affected”.
“Demand from equity-rich buyers has been more robust. And that from first-time buyers has stood up surprisingly well, albeit heavily supported by the Bank of Mum and Dad,” he added.
Savills also looked at the use of debt and equity, reporting that £20.7bn less mortgage debt was used to buy homes in the year to March 2024 compared to four years earlier.
However, a fall in the use of debt was offset by an 11 per cent rise in use of equity.
An increase in the use of equity was specifically fueled by a 19 per cent increase in spending by cash buyers over four years.
Spending among those cash buyers stood at £144bn in the year to March.
This is the equivalent to 42 per cent of the total spend on house purchases across the UK.
Future of the market
Looking ahead, Cook stated: “Interest rate cuts will mean that the range of buyers coming to the market will widen, and we can expect to see their spending power pick up over the next 12 months.
“Those who have put off plans to trade up the housing ladder over the past two years are likely to underpin growth in the housing market going forward.
“Though the headwinds haven’t completely died down, we have already seen a pick-up in agreed sales on the back of more stability in the mortgage markets.
“That suggests that as rates fall, the market will return to growth, despite owners who are yet to come to the end of their fixed rate experiencing an uplift in underlying their housing costs.”
Additionally, Savills mainstream forecast expects house prices to grow 2.5 per cent in 2024, primarily due to falls in the cost of mortgage debt, and 21.6 per cent by the end of 2028.
Housing transactions are forecast to reach 1.05mn in 2024, slightly up from the 1.01mn forecast at the back end of last year.
tom.dunstan@ft.com
What’s your view?
Have your say in the comments section below or email us: ftadviser.newsdesk@ft.com
