UK housing market 2024: Crash or Boom?

2024 UK property Crash?

Thanks to the stamp duty holiday and record lows in interest rates in 2021, which enabled buyers to purchase property without having to pay as much extra taxation, last year saw the largest increase in house prices since before the financial crash in 2007 – generating greater buyer activity and a demand boom, but how will that affect the housing market in 2022?

Soaring UK house prices through the pandemic meant that, in summer 2021, research showed that it was cheaper to rent than to buy for the first time since December 2014. The average tenant spent £71 a month less in rent than mortgage repayments (assuming they had purchased a property with a typical 10% deposit).

First-time buyers continue to be priced out as the average house price climbed further in 2021, meaning many are still choosing to rent at the start of 2022 until the market starts to settle again.

It is predicted that there will be a 20% reduction in the number of properties sold in 2022, following the bumper year of 2021, but that this will bring it back to more normal levels.

Predictions for market performance

Experts are relatively united in their predictions that 2022 will stabilise the housing market after the unusual movement caused by the Covid pandemic of the previous two years.

Rightmove’s director of property data, Tim Bannister, said: “While the pandemic is still having an ever-changing impact on society, we expect a housing market moving closer to normal during 2022. A closer-to-normal market means a slowing in the pace of price rises and a better balance of supply and demand for homes.”

Property professionals’ body Propertymark noted that there were just 20 homes available on average per estate agency branch in November 2021, the lowest figure in records going back two decades.

They said the imbalance between demand and supply had helped drive up house prices, and 38% of homes sold for more than the asking price in November 2021. Propertymark’s chief executive, Nathan Emerson, added: “Agents are not seeing any signs that demand will slow in 2022.”

Zoopla’s director of research, Richard Donnell, expects house sales to edge down to levels more in line with the long-term average, saying:

“As the UK emerges from the impact of the pandemic, housing transactions are expected to decline by 20% from their high of 1.5m in 2021, to 1.2m in 2022, in line with the long-run average, but still relatively high compared to the last decade.”

What other factors come into play?

Rising costs of living and steep energy price increases mean that many people have less disposable income to put towards a mortgage. So instead, they have to restructure their finances and put property purchases on hold.

Those sellers trying to make their second step on the property ladder may find it trickier to upsize due to other financial constraints. This may affect demand for entry-level properties, which will have a knock-on effect on supply and demand for first-time buyers, who may be hoping to get on the property ladder in 2024.

Furloughed employees were also unable to get a mortgage during the latter part of 2020 and moving into 2021, as lenders were reluctant to offer deals in that period of uncertainty.

However, with the end of the scheme in October 2021, those employees who remained in their jobs can now prove income with three months of full payslips, which may mean an upsurge in mortgage applications in 2022.

Where are people choosing to live?

House price growth is expected to be 3% by the end of 2022, with the highest growth projected for the East Midlands and northwest England, while growth in London is projected to remain low at 2%.

There has been a trend for people moving out of cities as flexible working has become more of a norm, meaning that workers no longer need to be within commuting distance of an office and can work remotely from the comfort of their own homes – wherever they may be. The desire for more inside space and larger outdoor areas has been particularly noticeable among house-buyers.

Garden offices have seen an increase in popularity. They provide a separate space from the main house to work quietly and without interruption, but with the convenience of only being a few steps away.

When is the best time to buy or sell a property?

There is no denying that buying a house now is more expensive than it was 12 months ago.

Mortgage rates are still low, despite the Bank of England increasing interest rates in December 2021 from 0.1% to 0.25%. However, as time goes on, rising rates could hit the housing market further by making it more expensive to borrow money and harder to find a cheap mortgage deal.

If fewer cheap loans are available, there is likely to be a reduced demand for houses, causing prices to slow down.

Spring is often a popular time to buy a property because more homes are on the market. March is generally a good time to buy – when the days start to get longer, and the weather starts to get warmer.

If you’re looking for quick completion, put your property on the market in March as more house-hunters are looking for somewhere to buy. People are often keen to complete before everyone heads off on the summer holidays, leaving August as a particularly quiet time in the housing market.

If possible, try to avoid putting your house on the market in either August or December – these are notoriously the worse months to try and sell.

Final thoughts

The consensus from those in the know seems to be that there will be neither a crash nor a boom in the housing market in 2024. Supply and demand are likely to level off to pre-pandemic levels and provide a sophisticated approach to the house-buying process.

Nevertheless, buyers need to be aware of the rises in living costs as the country attempts to claw back some of the financial burdens it accrued during the last two years. As a result, renting is still a safer option, where appropriate, until things become more certain again as we get further into 2024.

Author: Lucy Cromwell

Date: 1st of January 2024

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