It is almost always the case, that the pace of the market in January and February sets the tone for the year ahead. As we entered 2024, it felt as though there had been a step change. A pick-up in market activity, primarily led by a recovery in London.
The data provides proof of this new-found confidence. In January, more people registered to buy a home - and more homes came up for sale - than have done so during this month for over a decade.
In recent weeks, demand has held up well. The number of prospective buyers is 14% higher than during the same period of 2023, tracking slightly below 2022 levels – which was a strong year for the market. At the front of the queue are first-time buyers and upsizers.
What has caused this shift? The steady fall in mortgage rates has been the key catalyst, helping affordability. But, more generally, although the economic backdrop is somewhat dull, it has also been relatively stable. This has given a boost to sentiment, encouraging action among buyers who were hanging back in 2023.
Inflation has been heading downwards, and is now widely forecast to be close to the Bank of England’s 2% target in April. Based on this outlook, financial markets currently expect the Bank to embark on rate cuts in June, with two further reductions pencilled in for the second half of the year.
But, since these predictions are already priced into current mortgage rates, we do not foresee that the cost of these loans will change much over the next few months.
The UK technically entered a recession in the final quarters of 2023. But the latest metrics suggest that this was short-lived. This apparent upturn and the easing of the pressures on household finances, have boosted confidence in the housing market among buyers and sellers alike.
" For the first time since 2016, properties in the capital are more likely to sell for more than their asking prices than those in other regions"
This renewed optimism is highlighted in the key market metrics. Homes are now selling more quickly than before - about 8% of properties are going under offer within a week of being put up for sale, against 6% last year. More properties are being priced realistically - and buyers have more purchasing power thanks to lower mortgage rates.
As a result, fewer homes are being reduced in price, with more achieving closer to or more than their asking price. In the year to date, 24.3% of homes sold in England & Wales have fetched more than their asking price, slightly up from 23.6% in 2023. This may not seem much of an increase, but it is still above the number that was typical in the period before 2020.
Why is this? There may have been a 14% rise in the number of homes coming on the market since February, but choice remains more limited than during the pre-Covid era.
Significantly, London appears to be in the forefront of the recovery. For the first time since 2016, properties in the capital are more likely to sell for more than their asking prices than those in other regions. It’s also where the time it typically takes to sell has fallen the most this year.
Other indicators underline the comeback of the London market. It is the only region where there are fewer homes available to buy than last year, yet there are 23% more buyers seeking to move.
More sales are being agreed across the capital too, with 10% more deals struck in February this year than in the same month of 2019. This contrasts with a 5% decline in other regions.
The leading surveys add to the evidence that prices are no longer declining in all regions. The Halifax and Nationwide indices are the most up-to-date indicators, being based on these lenders’ mortgage approvals. Both surveys now record that prices are rising again on a year-on-year basis, which is starting to reverse the near 5% price falls reported by these indices in 2023.
The Office for National Statistics (ONS) index is the most comprehensive measure of house price growth since it includes both cash and mortgaged Land Registry completions. This index may be slower to record change, but it is also beginning to turn, showing a 0.7% annual price fall in January 2024, against a decline of 2.4% fall in December 2023 across Great Britain.
Despite much speculation beforehand, the Spring Budget contained few housing-related announcements. The Chancellor may sound eager to provide policies to support homeownership, but frequently rumoured measures, like a stamp duty concession and 99% mortgages for first-time buyers, failed to materialise.
This was a tacit acknowledgment that there is no easy fix to the problems in this segment of the market. Instead, the Chancellor chose to focus on more niche areas, tinkering with the existing rules rather than delivering any big changes.
"It appears prices bottomed out at the end of 2023 – and that we may even see some price growth in 2024"
He aligned the taxation of holiday lettings with long-term buy-to-let, abolished multiple dwellings stamp duty relief and cut capital gains tax for some higher-rate taxpayers (partially reversing previous hikes).
We may have to wait until the next Budget for plans to boost homeownership and housebuilding. In the meantime, the lack of announcements means that the market seems set on its current path. It appears prices bottomed out at the end of 2023 - and that we may even see some price growth in 2024. Conditions could resemble those of 2019 - which was, of course, also an election year.
