Will 2024 be a Buyer’s or a Seller’s Market?

As we begin 2024 we’re all beginning to wonder what the New Year may hold. After the challenges in the housing market during last year, what might 2024 bring and is it likely to be a buyer’s or a seller’s market?

Predicting market demand isn’t easy, especially in a market as unpredictable as we’ve seen in the past 12 months or so. It’s been hampered by several factors, including a high cost of living caused by high inflation rates and high interest rates designed to curb that inflationary figure. That in turn has impacted mortgage rates which are now triple what they were three years ago. It has also been a market that has struggled to recover from the consequences of Liz Truss’s mini-budget towards the end of 2022 which initially sent interest rates soaring.

Economic indicators and interest rates

The economic indicators we mentioned have been amongst the most challenging for some time. They have led to affordability issues and mortgage rate rises which have proved prohibitive for many of those wanting to get on the property ladder or move on somewhere new. That has therefore dampened demand. The Government and Bank of England are fighting hard to get inflation under control with the highest interest rate in 15 years, but that in turn has pushed up mortgage rates to their record highs.

The base interest rate rose for 14 months in a row until September 2023 when it was held static at 5.25%. As of December, the base rate has now been held constant for the past three months. However, the governor of the Bank of England, Andrew Bailey, has consistently warned that cutting interest rates won’t happen anytime soon. Many believe it will be another six months or so before that does happen, with Zoopla saying that it will be the second half of 2024 before we see rates of 4.5% again.

However, holding interest rates steady does seem to be having the desired impact. The Consumer Prices Index measure, including owner-occupiers' housing costs, rose by 4.7% in the 12 months to October 2023, but that figure is down from 6.3% the month before and edging closer to the Government target of 2%. It’s also half what it was at its peak.

Housing inventory and buyer demand imbalance

An abundance of housing inventory and buyers has also been a challenge. The number of homes for sale has reached a five-year high in 2023, which means competitive pricing by sellers is crucial to snare a sale since buyers have greater power to negotiate the prices that they want.

House prices are falling and are expected to continue to fall 2% over 2024 as the market and prices rebalance post-pandemic. But the drops are relatively modest and are likely to recover as affordability improves and demand picks up. More dramatic price drops had been expected but house price indexes from the likes of Halifax, Nationwide and Rightmove suggest year-on-year falls ranging between -1 and -2%.

A buyer’s market, for now at least

In the short-term, at least, it seems 2024 will begin as largely a buyer’s market, once again. With rival purchasers thin on the ground and coupled with an abundance of property for sale buyers have had the upper hand in 2023 and we’ll see that trend continuing. Zoopla predicts another year of 1 million house moves in 2024.

With affordability hampered by high mortgage rates, it’s an ongoing rise in wages that will support buying in 2024, coupled with realistic pricing from sellers. Zoopla’s research suggests that sellers are accepting an average £18,000 discount on asking prices to secure their dream property with the biggest price cuts being witnessed in southern England. Annual growth in regular earnings, meanwhile was 7.3% between August to October 2023, according to the most recent figures from the Office of National Statistics, released earlier this month.

It will be cuts in mortgage rates that will likely be the release trigger for a more balanced market. Encouragingly mortgage rates have already begun to edge down with the average rate for a five-year fixed mortgage now below 6% as lenders try to tempt more buyers back to the market.

In anticipation of those cuts demand is building, alongside the usual seasonal rise in buying interest for the new year. Once that pent-up demand is released, it’s likely we will see the floodgates open once more, as those who had put their buying and selling plans on hold are finally able to move forward with moving.