On average, house prices in the UK have risen by about 25% in the last 5 years (£288,000 in October 2023 vs. £231,000 in October 2018), fueling speculation on the future of the property market. With the upcoming general elections and forecasts suggesting a reduction of interest rates, investors worldwide are curious about house price predictions for 2024 — will the boom continue, or is there a bust on the horizon?
Leading analysts are divided on what the next 5 years may hold for house prices as political and economic headwinds cast uncertainty over the market. While some foresee a soft landing and modest single-digit growth, others warn that weak buyer confidence could plunge house prices into a downturn, spelling bad news for buyers and worse news for sellers. With so many unknowns in play, the housing market in 2024 remains a mystery, which we aim to analyse in this article.
Let’s start by analysing how various trends shaped how property prices fared in 2023.
2023 Trends in the UK Housing Market
Based on our analysis at API Global, house prices in the UK generally declined in 2023, in line with Capital Economics’ prediction. The average UK house price decreased by about 1.2% in the 12 months leading to October 2023. However, England still records the highest house prices, with some regions showing resilience despite the economic downturn.
London and South East England Saw the Highest Declines
In the 12 months leading to October 2023, South Eastern England experienced a home asking price drop of 2%, with London registering the largest decline at 3.6%. Other underperforming UK areas include the Eastern region, with an average house price decline of 2.3%. However, property experts predict this region will see prices rise more quickly over the next few years if high demand and limited supply persist.
The North and West Midlands Saw the Lowest Declines
As more people sought affordable housing and a better work-life balance, areas outside of major cities, especially smaller towns within commuting distance, saw minimal house price declines in 2023. Locations in the West Midlands (e.g. Birmingham) saw house prices drop by just 0.3%, while those in the North (e.g. Liverpool) registered varying house price changes. For example, while the North East experienced a 0.2% increase in average property prices, the North West recorded a 0.4% decline.
Monthly Mortgage Payment Was Relatively Stable
Mortgage lenders have significantly increased their rates, only reducing them slightly more recently. This reduction has helped diminish mortgage arrears and keep the market resilient despite the ongoing living crisis.
As of December 2023, the average two-year fixed mortgage payment rate was 5.95%, and the average five-year fixed rate was 5.57%. Given the declining inflation rates, mortgage broker companies deduce interest rates from the Bank of England have peaked and may see a decline soon. Hence, mortgage rates are likely to reduce further in 2024, following a decline in interest rates from the UK’s central bank.
Given the 2023 performance and recent trends, one big question on house price predictions remains — will house prices continue to go up in 2024? Read on to find out!
Will House Prices Go Up in 2024? (2 Key Indicators)
While many 2024 projections indicate a fall in UK house prices, some experts think otherwise. Recent house price forecast in 2024 suggests a modest increase across the UK, at about 3–4%. Two of the major factors driving price growth are high demand and limited housing supply.
1. High Buyer Demand
The demand for housing in desirable areas of the UK, especially in the North East, is predicted to remain strong through 2024 and beyond. For non-cash buyers, interest rates are expected to fall to 4.25% by the end of 2024, keeping mortgages affordable and encouraging first-time buyers and investors to enter the market. However, the plans to slash immigration levels may reduce the pool of prospective home buyers and renters in the UK.
2. Limited Housing Supply
New home construction has failed to keep up with demand in recent years, and this trend is likely to persist. Strict planning laws, lack of available land, and a shortage of skilled construction workers are all constraints on housing supply that will probably still be the issue in 2024. The deficit between supply and demand inevitably puts upward pressure on prices according to the law of supply and demand.
Are Rising House Prices Beneficial?
While surging house prices generally indicate economic growth, most experts predict a slowing to single-digit increases by 2024. The higher prices climb, the more unaffordable housing becomes for buyers, dampening demand. If the current trends continue, unemployment may also weigh on the market, as could consistently high interest rates if the Bank of England tightens monetary policy due to unabating inflation.
Overall, our analysis forecasts ongoing but moderate house price inflation in 2024. Investors looking to capitalise on continued price appreciation, especially in up-and-coming UK areas, should look to make their move into the UK property market.
With professional guidance from a wealth manager to help identify prime property development investment opportunities, the potential for solid returns on investment through rental income and capital growth is significant. However, what are other property experts’ property price predictions for 2024? Read on to find out!
Expert Forecasts for National House Price Changes in 2024
Despite speculations for increased house prices, housing market predictions for 2024 from prominent forecasters like the BBC, Investors’ Chronicle, and Lloyds Banking Group all predict that average house prices will decline. What are the reasons behind these projections, and are there any associated benefits?
According to the British Broadcasting Corporation (BBC), the government’s official forecaster predicts a potential drop of nearly 5% in property prices in the UK. However, there will be a 5–6% increase in rent value. This means existing property owners stand to benefit more, but prospective buyers have limited benefits in the short term. In that case, investors may be more inclined to buy properties when there are house price falls and hold them for longer for capital gains.
2. Investors’ Chronicle
Investors’ Chronicle forecasts a low single-digit decline or a broadly flat market for property prices in the UK in 2024. This prediction suggests that there may be minimal changes or a slight decrease in house prices during the year. House prices have been relatively resilient in 2023; however, investors should expect a slight change from projected fluctuations in mortgage rates.
3. Lloyds Banking Group
Lloyds Banking Group, which is Britain’s largest mortgage provider, predicts house prices will fall by 2.4% in the UK in 2024, followed by a subsequent recovery. This proposed fall and subsequent increase is likely to induce increased investment in buy-to-let properties in 2024. Historically, property prices have always increased, making property a worthwhile investment. However, investors should contact their wealth advisor to determine the best places to invest in property in the UK — more on this below!
3 Best Areas for House Price Growth Potential in 2024
With certain UK house price forecasts in 2024 suggesting a moderate yet steady growth—and some suggesting a decline—investors may be inclined to buy property now. However, location is crucial when making property investment decisions.
As leading UK property investment experts with several years of experience, here are our recommendations on the best areas to invest in the UK property market:
- The North West
- The Midlands
- The South East
1. The North West
The North West of England, especially Manchester and Liverpool, are some of the best areas to watch for strong house price growth in 2024 and over the next decade. Manchester, in particular, is benefiting from major infrastructure improvements, a thriving cultural scene, two leading universities, and a fast-growing digital tech sector.
JLL’s UK Residential Forecast project house prices in Manchester could rise by 25.8% by 2026. Nearby Liverpool also offers solid growth potential, with house prices predicted to increase by 27.3% by 2026.
2. The Midlands
Birmingham and the wider Midlands region are poised for a significant increase in property values over the coming years. Birmingham, the UK’s second city, is attracting major investment in infrastructure, retail, and business. The arrival of HS2 will further boost connectivity and economic activity in the region.
3. The South East
Areas within commuting distance of London in the South East, such as Reading, Oxford, Milton Keynes and Cambridge, are projected to see house price growth outstrip the national average over the next few years. The South East is one of the UK’s fastest-growing regions, and these university cities and towns remain attractive to buyers looking for employment opportunities, good schools, and an affordable alternative to London. House prices are predicted to rise significantly across this region by 2028, indicating a good place to invest.
So, while UK house market predictions for 2024 suggest a slow to around 1–5% house price increase per annum, certain regions and cities are poised to significantly outperform this average. Investors seeking strong, long-term house price growth would do well to consider dynamic cities like Liverpool and Birmingham. These areas offer the combination of economic opportunity, connectivity, lifestyle benefits and affordability that will continue to drive the property market over the coming years.
Tip: Check our post on the best buy-to-let areas in Liverpool.
However, property investment isn’t without risks, and investors should be aware of the various ways to manage them, as we’ll see in the next section.
3 Tips for Managing Risks and Uncertainty in 2024’s Housing Market
While the predicted house prices for 2024 suggest a moderate increase, investors should exercise caution given the uncertainty in the market. Predictions are speculative and are based on existing data and market conditions. Unforeseen events, economic shifts, and policy changes can significantly impact the housing market.
The following tips can help investors manage the associated risks and uncertainty:
- Managing risk through diversification
- Focusing on high-growth areas
- Considering alternative strategies
1. Managing Risk Through Diversification
To mitigate risk, investors should diversify their property portfolios across regions and sectors. Targeting a mix of capital growth and rental income properties in areas with strong fundamentals can help weather market fluctuations. Investing in a mix of short-let apartments, buy-to-lets, and the best Airbnb property UK locations may provide more stable returns as demand is less tied to the wider economy.
2. Focusing on High-Growth Areas
Areas in the Midlands and North West of England, as well as specific towns and cities in Wales and Scotland, are poised for strong price growth and higher rental yields due to improved transport links, increased investment, and more affordable housing. Targeting up-and-coming locations before significant price appreciation allows investors to maximise capital gains. We recommend working with a UK property advisor to help determine the best locations.
3. Considering Alternative Strategies
For risk-averse investors, alternative strategies like property crowdfunding, REITs (Real Estate Investment Trusts), and property bonds may be attractive. These options provide exposure to the housing market without direct ownership of physical property. Investors can choose between debt and equity investments with varying risk-return profiles to match their preferences. However, these options don’t provide the benefits of owning a physical property and capital gains that make property investments appealing.
The uncertainty surrounding the general election, interest rates, and the overall economy means the market could move in unexpected directions. Close monitoring of market indicators and government policy changes allows investors to adjust their strategies to limit downside exposure if needed. With prudent decision-making, the predicted price increases for 2024 can present attractive opportunities for investment success.
Frequently Asked Questions
Are house prices dropping in 2024?
It’s not certain that house prices will drop in 2024; house price predictions for 2024 are relative. According to a recent BBC publication, Robert Gardner, chief economist at Nationwide, suggests a potential decrease or stagnation in house prices. However, other experts suggest that prices may rise by around 3–4% over the year. Therefore, the changes in the housing market in 2024 may vary depending on several factors, including location and economic conditions.
Is it a good idea to buy property in 2024?
According to Tim Bannister from Rightmove, 2024 might be a good time to buy property. With experts predicting a modest 1% house prices fall, coupled with a somewhat muted market, it may offer potential bargains. However, individual financial circumstances and market conditions should always be taken into account when determining whether or not to buy property in 2024.
Should I buy a house now or wait until 2025 in the UK?
Based on the Office for Budget Responsibility’s forecast, waiting until early 2025 to buy a house in the UK could potentially be beneficial. They predict a low in property prices between December 2024 and early 2025, with an average price drop of 7.6%. However, personal circumstances and market changes should be considered before making decisions.
What are the predictions for UK property prices over the next 5 years?
Experts predict a 17.9% increase in UK property prices over the next 5 years. Savills project a 3% decline in house prices, followed by a 20% increase between 2025 and 2028. This will push the average home price to about £300,108, reflecting a £45,521 increase from the 2023 figure.
While no one can forecast house price predictions for 2024 with certainty, some evidence points to continued modest house price growth in the UK over the next few years. For investors seeking strong capital returns, the key will be identifying up-and-coming areas and new housing hotspots before prices start to accelerate.
The fundamentals of the UK housing market remain sound — high demand fueled by population growth and low interest rates. If our forecasts, coupled with the takes of some industry experts, are correct, the outlook for UK house prices in 2024 and beyond isn’t certain, but is likely to be positive. Investors willing to take advantage of this opportunity should contact their wealth manager.
Disclaimer: Any information API Global provides does not constitute financial advice and is for educational purposes only.