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The Nationwide’s latest House Price Review and Forecast: Rapid rebound in house prices unlikely in 2024. House prices to see low single digit decline or remain broadly flat in 2024.
According to the Nationwide, the total number of transactions has been running at c15% below pre-pandemic levels over the past six months, with those involving a mortgage down even more (c25%), reflecting the impact of higher borrowing costs. On the flip side, cash transactions have been running above pre-Covid levels.
House prices in November were 2% lower than the same period in 2022, and 4.3% below the all-time high recorded in late summer 2022. Higher mortgage rates are still more than three times the record lows prevailing in 2021 in the wake of the pandemic.
A borrower earning the average UK income and buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 38% of take home pay – well above the long run average of 30%. A 20% deposit on a typical first-time buyer home equates to over 105% of average annual gross income – down from the all-time high of 116% recorded in 2022, but still close to the pre-financial crisis level of 108%.
According to Robert Gardner, Nationwide’s Chief Economist, there have been some encouraging signs for potential buyers recently with mortgage rates edging down. Investors have become more optimistic that the Bank of England has already raised rates far enough to return inflation to target and will reduce rates in the years ahead. This shift in view is important, as it has brought down longer term interest rates which underpin fixed mortgage rate pricing.
While cost-of-living pressures are easing, with the rate of inflation now running below the rate of average wage growth, consumer confidence remains weak, and surveyors continue to report subdued levels of new buyer enquiries. Moreover, while markets are projecting that the next Bank [Base] Rate move will be down, there are still upward risks to interest rates. Inflation is declining, but measures of domestic price pressures remain far too high.
He added: “It appears likely that a combination of solid income growth, together with modestly lower house prices and mortgage rates, will gradually improve affordability over time, with housing market activity remaining fairly subdued in the interim. If the economy remains sluggish and mortgage rates moderate only gradually, as we expect, house prices are likely to record another small decline (low single digits) or remain broadly flat over the course of 2024.”
Source: Techlink Professional
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