UK house prices set to fall in 2024

House prices are expected to remain under pressure in 2024, according to industry forecasts published on Friday, as high interest rates continue to stretch affordability.

According to the Halifax, house prices are set to fall by between 2% and 4% next year, while Nationwide expects them to range from broadly flat to a low single digit decline.

Both cited affordability issues as well as the weaker economic outlook.

The Bank of England has increased interest rates 14 times since December 2021, to a 15-year high of 5.25%, as it looks to tackle surging inflation.

Rates have now been left on hold for the last three meetings, and most analysts agree the current rate cycle has peaked.

But the BoE has yet to give any firm indication about when it will start cutting the cost of borrowing.

Mortgage rates, meanwhile, surged last autumn in response to the disastrous mini budget, and have only recently started to moderate.

At 4.6%, inflation is considerably lower than last year’s high of 11.1%. But it remains well above the BoE’s 2% target.

Robert Gardner, chief economist at Nationwide, said: "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.

"There have been some encouraging signs for potential buyers recently, with mortgage rates edging down. Investors have become more optimistic that the BoE has already raised rates far enough to return inflation to target.

"Nevertheless, a rapid rebound in activity or house prices in 2024 appears unlikely. While cost of living pressures are easing, consumer confidence remains weak."

The Halifax noted that UK property prices held up better than expected in 2023, falling by just 1% on an annual basis.

But it added that the market’s resilience this year was down to a shortage of housing rather than strong buyer demand.

Kim Kinnaird, director of Halifax Mortgages, said: "Mortgage approvals were down a quarter across the market, while overall housing transactions were a little under 20% down - both the lowest in at least a decade.

"Looking ahead, while pay growth is now above inflation, beginning to ease the cost of living squeeze, other factors will continue to weigh on household’s spending power next year.

"Economic growth is expected to remain weak, with unemployment rising and frozen tax thresholds limiting any increase in take home earnings."