Six trends for 2024

In 2023 first-time buyers (FTBs) accounted for a record 28% of transactions across Great Britain. This is despite higher mortgage rates, although many FTBs have been helped onto the ladder by an intergenerational subsidy – from the Bank of Mum or Dad or grandparents.

Quite a few FTBs have been escaping soaring private sector rents. But many who hoped to leap into homeownership have been priced out by the surge in the cost of borrowing. Will they have better luck in 2024? Not necessarily. Lower mortgage rates will increase the already tough competition for smaller properties. And rates (or prices) are unlikely to come down enough to unlock many more new purchases. As a result, 2023 may prove to have been the peak for FTB purchases.
 
Nowadays most new housing is built by private sector developers – which means that delivery depends on the mood of the property market. Current conditions and cost pressures on developers mean that the number of new homes built over the next 18 months will be well below the numbers delivered over the past couple of years. There will be fewer homes of all types, including affordable housing.

In the short term, the slowdown in supply will underpin prices, with developers ensuring that homes are not completed any faster than they can be sold. But housebuilding is set to be a key battleground in the general election, which suggests that both of the two main parties could unveil a reincarnation of the Help to Buy scheme under a new name.
 
The members of the Baby Boomer generation – people aged between 57 and 75 - make up 36% of all households. But they account for 56% of households that own a home, with much of their wealth tied up in this property.

Since nearly all have only a tiny mortgage or own outright, they can use this equity to downsize. But in 2024, Baby Boomers will not only be using their equity to snap up a smaller home. Many will be opening up a branch of the Bank of Mum and Dad (BOMAD) to help their children climb onto the ladder or move to a larger property. The Boomers will also be lending a hand to their grandchildren.
 
The Land Registry reported in June that the prices of flats were rising faster than those of houses in just over a quarter of all local authorities, following a period when the values of smaller properties languished. Higher mortgage rates have spurred the ascent of smaller homes which are more affordable for those borrowers who have only a small deposit.

This trend seems likely to continue in 2024. Price falls seem set to be restricted to larger properties - which soared during the Covid race for space. It seems that households who would have liked to move to something bigger are either staying put and renovating, or opting for less expensive neighbourhoods.
 
The financial markets are betting that interest rates will stay higher for longer. To date, the rise in the cost of borrowing has dampened house prices but sparked an increase in rents.

Mortgage rates seem to have peaked and should move downwards. But we still expect rates to remain higher than has been the norm - which will weigh down on price growth over the medium term.

By contrast, rents are likely to continue rising until landlord’s profit margins are at least partially restored, or their costs begin to fall. We forecast that rents will rise more than four times faster than house prices over the next four years – an unprecedented event in recent market history.
 
The general election looks set to be fought firmly on the centre ground. Traditionally there has been a modest preelection market slowdown, as buyers stayed put and weighed up the potential outcomes. Concern over a change of government tended to be most acute in prime markets.

But we are not expecting a big slowdown brought about by uncertainty this time around. At present, the odds may suggest a new occupant at 10 Downing Street. But, ideologically, the current leaders of the two main parties are not a million miles apart. As more detail of the contents of the parties’ manifestos begins to emerge, this should dispel any uncertainty