House prices set to rise by the end of 2024

House prices remain flat in May but look set to be 1.5% higher by the end of 2024, Zoopla reports.

According to its latest House Price Index, house prices are currently 8% ‘over-valued’ but will be ‘fairly valued’ by the end of the year due to rising incomes.

Zoopla’s data shows that despite the election, home buyers and sellers remain active, with demand up by 6% and sales agreed increasing by 8% compared to this time last year.

Price falls in the Eastern region

Zoopla’s House Price Index reveals house prices rising across all areas over the last three months to May 2024, however, on an annual basis house price growth remains negative across southern England, but rising elsewhere.

Price falls are currently greatest in the Eastern region (-1.4%) and South East (-1%), with Canterbury in Kent topping the list with the biggest price fall (-4.1%).

Prices are rising by up to 3.3% in Northern Ireland and 1.5% in the North West region, with Sunderland experiencing +5.2% price increase.

General election limited impact on market activity

Richard Donnell, executive director at Zoopla said: “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.

“The general election has had a limited impact on market activity although the seasonal summer slowdown is arriving.

“Sales agreed continued to increase and more homes for sale means more buyers looking to move in the second half of the year.

“The timing of the first cut in the base rate is a key moment and will give a boost to both market sentiment and sales activity. Overall we expect house prices to be 1.5% higher over 2024.”

Mortgage rates jump in 2023

Zoopla has a long-run model that tracks whether UK house prices are too expensive or fairly valued.

It highlights that UK home prices were significantly over-valued by more than 50% before the global financial crisis in 2007, and even more over-priced during the housing boom of the late 1980s.

Zoopla explains in both these cases, economic recession led to double-digit house price falls.

The latest 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.

Zoopla reports the short-term prospects for the housing market will hinge on mortgage rates, which are a function of the outlook for interest rates. Based on city forecasts for base rates, mortgage rates are expected to remain in the 4-4.5% range.

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