Nationwide predicts lower house prices in 2024

The UK’s house prices are expected to either drop slightly or stay mostly unchanged next year, according to Nationwide.

The lender says the housing market was ‘sluggish’ this year with 15% fewer transactions than before the pandemic.

This was more pronounced for mortgage-based deals, which fell by a quarter due to higher lending costs.

However, cash deals were higher than pre-pandemic levels.

‘Subdued picture was also reflected in house prices’

Nationwide’s chief economist, Robert Gardner, said: “This subdued picture was also reflected in house prices, which in November were 2% lower than the same period in 2022, and 4.3% below the all-time high recorded in late summer 2022.

“Even though house prices are modestly lower, and incomes have been rising strongly, at least in cash terms, this hasn’t been enough to offset the impact of higher mortgage rates, which are still more than three times the record lows prevailing in 2021 in the wake of the pandemic.

“As a result, housing affordability is still stretched.

“A borrower earning the average UK income and buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 38% of take home pay – well above the long run average of 30%.

“A rapid rebound in activity or house prices in 2024 appears unlikely.”

‘Deposit requirements remain prohibitively high’

Mr Gardner added: “At the same time, deposit requirements remain prohibitively high for many of those wanting to buy – a 20% deposit on a typical first-time buyer home equates to over 105% of average annual gross income – down from the all-time high of 116% recorded in 2022, but still close to the pre-financial crisis level of 108%.”

He says potential buyers and investors should be encouraged by signs that mortgage rates edging down and that the Bank of England does not look like raising rates.

He said: “While cost-of-living pressures are easing, with the rate of inflation now running below the rate of average wage growth, consumer confidence remains weak, and surveyors continue to report subdued levels of new buyer enquiries. “Inflation is declining, but measures of domestic price pressures remain far too high.

“It appears likely that a combination of solid income growth, together with modestly lower house prices and mortgage rates, will gradually improve affordability over time, with housing market activity remaining fairly subdued in the interim.”

Mr Gardener added: “If the economy remains sluggish and mortgage rates moderate only gradually, as we expect, house prices are likely to record another small decline – low single digits – or remain broadly flat over the course of 2024.”

Share This Article