According to recent reports, the UK housing market is set to experience a slight decline in prices next year. Factors such as the cost of living, high interest rates, and subdued buyer activity are cited as the main contributors to this trend.
Halifax predicts a decrease of 2% to 4% in house prices in the coming year, while Nationwide suggests a fall in low single digits which would result in prices remaining relatively flat.
In November, the average house price was recorded at £283,615 according to Halifax, with Nationwide reporting a figure of £258,557. This represents a year-on-year decline of 1% and 2% respectively. Differences between the two measurements can be attributed to variations in data collection methods.
Kim Kinnaird, Director of Mortgages at Halifax, explained that the combination of rising living costs and interest rates, which remain significantly higher than they were two years ago, will likely continue to place mild downward pressure on house prices.
Nationwide acknowledged some positive signs for potential buyers, but stated that an immediate rebound in market activity or prices is unlikely in 2024. The report highlights ongoing weak consumer confidence and subdued levels of new buyer enquiries reported by surveyors.
The current interest rates in the UK stand at a 15-year high of 5.25%, and they have remained unchanged since August. This level was last observed in February 2008.
The Bank of England recently announced that it is too early to consider reducing its key interest rate, as officials voted to maintain the current levels. Inflation currently stands at 4.6%, exceeding the target rate of 2%.
Berkeley Group Holdings, a prominent UK housebuilder, anticipates continued sluggish sales until there is a greater sense of confidence in falling interest rates and economic stability. Similarly, Taylor Wimpey has expressed concerns about the significant market uncertainty they are facing.
Overall, the outlook for the UK housing market suggests a modest decline in prices in the coming year, driven by various economic factors. While there may be some positive indicators for potential buyers, any significant recovery is expected to be gradual.