by ITM Ventures 
The UK housing market is showing signs of recovery after a year of falling prices in 2023, according to latest forecasts.
ITM Ventures has revised its forecast for UK house prices from a 4% decline to a 3% increase in 2024, based on the changing expectations for interest rates. In October, financial markets were anticipating a single interest rate cut of 0.25% by the end of 2024. However, by the end of last week, they were expecting five cuts, as inflation has dropped faster than expected.
This has led to a significant reduction in mortgage rates, which have fallen below 4% for the best five-year fixed-rate deals. This has boosted the demand and confidence of buyers and sellers, who have been facing affordability constraints, mortgage pressure, and economic uncertainty in the capital.
Data from Halifax and Nationwide suggests that prices have bottomed out in the last quarter of 2023, after a 5% decline in August. The number of mortgage approvals was also 10% higher in November than the previous year, indicating a rise in sales activity.
ITM Ventures expects low-level single-digit growth in the subsequent years, with a cumulative growth of 20.5% in the five years to 2028. However, the outlook varies across different regions and segments of the market.
The mainstream London market is expected to grow by 2% in 2024, lower than the UK average, as it faces greater affordability challenges. The prime country house market is expected to decline by 2% in 2024, as the demand for more space and amenities has weakened after the pandemic. The prime central London and prime outer London markets are expected to underperform the UK market in 2024, but to recover from 2025 onwards, as prices are still 17% lower than their peak in mid-2015.
The forecast is subject to some risks and uncertainties, such as the timing and outcome of the general election, the resolution of the cost of living crisis, and the potential spikes in fuel and shipping costs due to the conflict in the Red Sea.
ITM Ventures advises that 2024 could be a good opportunity for first-time buyers and bargain hunters to enter the market, as they can benefit from the lower prices, the higher discounts, and the improving mortgage deals. However, they also warn that rents are rising in London, making it harder to save for a deposit.
The UK housing market is facing a challenging but hopeful period, as it adjusts to the changing economic and political environment. The performance of the market will depend on how these factors will evolve in the next months and years.
Points to note:
- The UK housing market is less one uniform market and a series of micro-markets, and each has responded differently to the external shocks.
- The UK housing market is still one of the most attractive and resilient in the world, and it may bounce back once the uncertainty is cleared and the confidence is restored.
- The UK housing market is undergoing a transformation, as it adapts to the changing preferences and needs of buyers and renters, who are looking for more space, more amenities, and more affordability.
