UK House Prices Set to Rise 1.5% by End of 2024

According to the latest data from Zoopla, UK house prices are on track to increase by 1.5% by the end of 2024. This growth is attributed to steady income growth, which is easing the impact of higher mortgage rates. The report also reveals that homebuyers are largely shrugging off the election, with new sales agreed 8% higher, and demand up 6%. Additionally, there are 19% more homes for sale than a year ago.

Housing market activity remains strong

While there are signs that market activity is beginning to seasonally slow, sales agreed are down slightly month on month across all regions. The overall stock of homes for sale continues to grow across all areas, albeit at a slower rate than recent months.

Zoopla’s long-run model, which tracks whether UK house prices are too expensive or fairly valued, highlights how UK home prices were more than 50% over-valued in the run-up to the global financial crisis in 2007. In contrast, the current analysis finds that the jump in mortgage rates over 2023 led to UK house prices becoming over-valued by 13% at the end of 2023. This more modest over-valuation of home prices explains why there have been modest annual price falls over the last year compared to previous periods.

“The housing market continues to adjust to higher borrowing costs through modest house price falls and rising incomes. Buyers using mortgages are also relying on longer mortgage terms to gain that extra few percentage points of buying power to afford a home.” - Richard Donnell, Zoopla Executive Director

Currently, UK house prices are estimated to be 8% over-valued, but by the end of the year, this over-valuation will disappear, assuming house prices rise 1.5% and mortgage rates remain at 4.5%. Rising incomes and longer mortgage terms are helping to improve affordability, which will, in turn, support the continued improvement in sales volumes and single-digit house price growth over H2 2024.

Mortgage rates remain steady

In contrast to reduced sales throughout 2023, Zoopla data shows that the market remains on track for 1.1 million sales in 2024. And 75% of these sales are either completed or agreed and working towards a completion – with a quarter of a million sales yet to be agreed.

“It’s been a positive year so far for the housing market, and it’s extremely upbeat to see confidence returning, despite some of the challenges people have faced such as high inflation and interest rates.” - Nathan Emerson, Propertymark Chief Executive

The 1.1 million sale figure is 10% higher than 2023 but still below the 20-year average. However, rising sales are positive and show more realism on the part of sellers and renewed, cautious confidence amongst buyers.

Confidence returns to the housing market

Responding to the Zoopla HPI, Propertymark Chief Executive Nathan Emerson commented: “With the general election now less than a week away, we are keen to see any incoming government lay down their full plans to further support current homeowners on aspects such as energy efficiency, but also to fully get behind key groups like first-time buyers as they set out on their property journey.”