UK house prices are expected to stagnate in 2024, according to a revised forecast from Capital Economics, which now forecasts a modest rise of 0.5%, down from the previous prediction of 2%.
This adjustment follows the recent survey conducted by the Royal Institution of Chartered Surveyors (RICS), which revealed a decrease in buyer inquiries, a decrease in agreed sales, and an increase in price reductions compared to previous months. Real estate agents attribute the downturn to the recent rise in mortgage interest rates, with the average five-year fixed interest rate on a mortgage exceeding 5% for the first time since January.
Housebuilder Crest Nicholson has also noted a “downturn” in demand since Easter, citing “volatility in mortgage rates” as the main reason. Andrew Wishart, chief UK economist at Capital Economics, noted that this decline in demand coincides with the most significant sustained increase in housing supply since 2013, excluding the period following the post-lockdown market reopening.
Despite the rapid increase in mortgage costs, house prices have remained more resilient than expected over the past 18 months. Analysts believe that this stability is due to a simultaneous decline in supply, with a decrease in the number of people putting their homes up for sale. However, recent reports indicate a rise in new listings, leading Wishart to predict that the market will soon see an oversupply, which could cause prices to decline over the summer.
Wishart's revised forecast takes into account the combined impact of increased housing supply and continued high mortgage rates, resulting in a more conservative 2024 forecast.
In contrast, other economists remain optimistic. Rob Wood, chief UK economist at Pantheon Macroeconomics, acknowledged the impact of higher mortgage interest rates, but stressed that interest rate cuts by the Bank of England later this year could revive buyer interest, which could lead to higher house prices. By 3% in 2024.
