As we approached Christmas, it became evident to housing market analysts that mortgage affordability was exerting downward pressure on house prices. This trend is expected to persist into 2024, with estate agency Savills predicting an average drop of 3% in UK house prices. However, there are indications of rising buyer confidence as mortgage rates begin to decline.
Savills’ recent survey, which involved over 1,400 potential buyers and sellers and concluded last week, reflects an increasing determination to proceed with property transactions. The survey reveals a net balance of 30% of respondents expressing a heightened commitment to moving within the next six months, a notable increase from 14% in July 2023. This surge in commitment is particularly evident among debt-dependent buyers who are encouraged by falling mortgage rates and the opportunity to lock in lower borrowing costs.
The survey asked participants about their reasons for considering 2024 as the right time for a house move. The majority, 57%, expressed a desire to “just get on with life.” Another 31% perceived improved affordability or believed that house prices were nearing their lowest point. Meanwhile, 12% preferred to invest their money in property rather than other channels.
Frances McDonald, a research analyst at Savills, highlighted that these findings align with the latest data from RICS (December), which shows a significant increase in new buyer enquiries since April 2022. The motivations for moving vary among buyer groups, with 32% of first-time buyers indicating they had finally saved enough for a deposit, and 26% preferring to invest in their own property rather than continue renting.
Among downsizers, 47% are motivated by homes that are now too large for their needs. Additionally, 15% aim to release equity for retirement, and 12% wish to relocate closer to local amenities and transport.
McDonald added, “Most prospective buyers are also not in a position in which they feel they need to alter their budget. Just 14% mentioned reducing budgets compared with three months ago, while a similar proportion is looking to spend more.” Remarkably, about one in eight are in a position to decrease borrowing without affecting their budget, planning to use more cash or equity. Cash purchasers accounted for 43% of transactions in 2023, a significant increase from the 35% recorded pre-pandemic.
For 2024, Savills anticipates a modest 3% decrease in average UK house prices, signaling that the worst may be over for the housing market. However, prime markets, which rely less on borrowing, are expected to rebound more swiftly. Prime central London, in particular, is forecasted to be the strongest performer with no anticipated price falls, while prime regional markets, which excelled during the pandemic, are expected to see a slight decrease of just 1.5%.
Concluding, McDonald expressed optimism for the year ahead: “The signs are that 2024 could be the time to get moving.”