UK Property Market: A Shift Towards Greater Affordability
The UK property market is undergoing a significant shift, marking the longest period of increased affordability in over twenty years. This change is driven by a blend of expected wage growth and a potential stagnation or decrease in house prices, enabling more individuals to become homeowners.
Property Prices’ Downward Trend
Nationwide reports indicate that UK house prices fell by 1.8% in 2023, largely due to higher mortgage borrowing costs. England and Wales experienced the most significant declines. Predictions for 2024 suggest a continuation of this trend, with flat or slightly falling prices. In the year leading up to November, HMRC data showed residential transactions decreasing by 22%.
Impact on Consumers
Despite high deposit requirements and stretched housing affordability, buyers are now targeting smaller, less expensive properties, which are holding up better than other property types. A typical first-time buyer property requires a 20% deposit, equivalent to 105% of average annual gross income. The average house price in December stood at 257,443, but variations exist across UK regions. Northern Ireland and Scotland saw increases, while East Anglia and England as a whole experienced declines.
Outlook for 2024
Financial markets predict that interest rates could be cut as early as May 2024, encouraging some banks to reduce mortgage rates. However, with 1.6 million mortgage deals expiring next year, many mortgage holders could face a shock as they shift from cheap fixed-rate deals to higher-rate products. This, coupled with a weak consumer confidence, has sparked concerns about a potential economic recession. Regardless, there is still demand from first-time buyers and downsizers, with 28% of all homes sold going to first-time buyers and 41% of existing homeowners moving to smaller properties.
