Buyers return en masse but face the same economic challenges

26/03/2024
(Last Updated: 01/04/2024)
7 min read

Average House Price London

£517,726
(Jan 2024)

Sales Volume London


3,456
(Nov 2023)

Average House Price England & Wales

£293,976
(Jan 2024)

Sales Volume England & Wales

32,995
(Nov 2023)
Key Takeaways for March 2024

  • November 2023 saw the worst-ever sales volume of 32,995 for the month, 55% down on 2022.
  • House prices remained close to record highs at £293,976; only 2% down on January 2022.
  • Bank of England hold base rate at 5.25%, but inflation is falling closer to the 2% target.
  • Property Mark reports, "Those who had delayed moving at the end of last year have returned to the market on mass".
  • Most estate agents sold fewer houses in February than in January, and fewer of those surveyed expect sales to increase than did a month ago.
  • Inflation is forecast to halve in a matter of months and drop below the target rate of two per cent.
  • The price cap, which sets a maximum rate per unit that customers can be charged for their energy use, will fall by 12.3% on the previous quarter, from 1st April to 30th June 2024.
  • Read our local housing market reports for - London, Kent, Hampshire, West Midlands, Essex and West Yorkshire.

March 2024 Housing Market Report

In a month where the budget was delivered, there was very little within it to support the property market. As our February Housing Market Report predicted, capital gains tax was reduced from 28% to 24%. It is a helpful boost for buy-to-let landlords but not much use for homeowners wanting to climb up the housing ladder.

In Propertymark's January Housing Insight Report, they echo my opinion that the high interest rates and fewer mortgage products at the end of 2023 caused a mini-housing market bubble. They reported that "the average number of new buyers registered per branch increased by 120% in January following a considerable fall in December". While the increase shows confidence in returning to the property market, those buyers still face the same economic environment, with mortgage rates at a 15-year high.

The Royal Institution of Chartered Surveyors (RICS) flagged this issue as they stated that UK estate agents believe mortgage rates may start to rise and the housing market slow. Even though the Bank of England held the base rate at 5.25%, mortgage lenders have been increasing mortgage rates on their products and will continue to do so until there is some certainty around when a base rate cut will come and by how much.

House prices remain close to record highs. The Halifax reported that house prices rose by 0.4 per cent in February, marking the fourth monthly uptick in a row. The figures indicate the property market recovery is starting to grow after a stagnant 2023, with prospective buyers encouraged by easing mortgage costs and a rosier economic outlook.

Have you heard about heat pumps?

Heat pump installation is vital to the Government's goal of hitting their climate target by decarbonising UK homes. The critical issue seems to be linked to the high costs, policy uncertainty and lack of consumer awareness.

The National Audit Office (NAO) reported that only 55,000 domestic heat pumps were installed in 2022, while the Government’s longer-term aim is 600,000 installations annually by 2030. In the same year, 1.5 million new gas-fired boilers were installed. The NAO has urged the government to increase public awareness of green technology and work to reduce costs to encourage uptake.


What our survey revealed about homebuyers
Our survey, conducted by YouGov, reveals the top challenges faced homeowners when buying their most recent property, plus the true costs of defects when skipping a home buyers survey.


What are homebuyers looking for?

When will the base rate fall in 2024?

The Office for Budget Responsibility expects inflation to halve in a matter of months and drop below the target rate of two per cent. UK inflation fell to 3.4 per cent in February, the lowest level since September 2021, down from four per cent in January, according to the Office for National Statistics. The fall adds to speculation that the Bank of England (BoE) will cut interest rates in the summer.

I had expected a base rate fall in March ahead of the predicted summertime reduction. I still anticipate the base rate to fall before June, most likely in April.

The increase in the minimum wage may have contributed to the decision to hold the base rate where is it, whilst we see how this increase affects inflation. The increase was a second successive jump in the UK minimum wage, continued wage growth could pull inflation upward as broader economic pressures start to ebb.



Source: Office for National Statistics (ONS)




Lowest sales volume for November


London Housing market declines as property sales fall by 45%. A Cartoon of a man trying to hold up the property market with ropes

London has the lowest sales volume for November since records began, achieving just 3,456 sales, 57% down on the previous year's 8,017. Even after the financial crash of 2008, sales in November only fell to 4,078. For more on London, read: London Housing Market Report.

Average house prices in London fell year on year by 4%, to £517,726, for January 2024.


Source: House Price Index (HPI)


England & Wales

England and Wales echo London with a 55% fall year on year, making November the worst on record at 32,995 property sales. We now know the economy slipped into recession during this time, while mortgage interest rates were high, so expect volume increases from January onward as Land Registry data is released.

Are UK house prices falling?

Average house prices in England & Wales fell year on year by 2% to £293,976 for January 2024.



Source: House Price Index (HPI)


Mortgage reports


Home buyers

Mortgage approvals for home buyers rose drastically in January 2024 to 55,227, 29% higher than last year. This shows how buyers returned to the property market in January, but we don't yet see the same level as in 2022 where there were 73,710 house mortgage approvals. A sign we are moving in the right direction, though we still have a way to go.

The base rate is set to come down, and there's high demand. Why increase mortgage rates?

Banks budget for how much money they need to offer mortgages and then source those funds from other markets. For example, they may budget £500 million to service their mortgage demand. Since November, the demand has been higher than they budgeted, for example, £700 million. This means the banks need to source more money to meet demand and may also have to pay a higher rate for that money. The banks increase the interest rates on their mortgage products to re-coop the cost and slow down the demand.

Banks that reduce mortgage rates have surplus mortgage reserves and want more of the mortgage market.

Remortgages

Remortgages are up by 16% on Jan 2023, with 30,885 approvals in Jan 2024. An improvement, but not close to the 47,678 approved in January 2022.



Source: Bank of England


Equity release rates come down.

For over-55s, an equity release plan might be your only option to free up the equity in your home. The high interest rate applied to the loan can make this a less appealing option.

There is, however, good news as much like mortgage rates, equity release rates follow the BOE base rate trends, and in December, rates started to fall. According to Legal & General, between July and September 2023, the average equity release interest rate fell from 7.52% to 6.63%.

If you're looking at this type of funding, read: What is the equity release solicitor cost & process?

Developers slow down building during base rate hikes

Source: Gov.UK



After the record high of new starts in the 2nd Quarter of 2023, developers hit the brakes on building fresh stock, falling to 22,230 in the 3rd Quarter, down 69% on the previous quarter and 52% on 2022. This will only fuel the house prices upward, with buyers short on fresh housing stock.

Expect to see more house-building pledges as we march toward a General Election.

Source: House Price Index (HPI)


Andrew Boast FMAAT MIC
CEO and Author | SAM Conveyancing

Summary

Home buyers return to the housing market en masse in 2024, following a stagnant 2023. They have returned to a property market still facing challenges: rising sales prices, high mortgage rates, and uncertainty about when the base rate will come down.

The budget brought little joy to the housing market other than incentivising landlords to sell and pay less capital gains tax.

In the run-up to a General Election, expect to see more housing pledges from all parties, such as

  • Achieving 300,000 new homes a year.
  • Further relaxing of planning applications.
  • Tax cuts.
  • Climate change pledges.

There are clearly a large number of buyers in the market looking to get on the housing ladder or to climb it. We need to see the BOE base rate remain stable at current or lower rates to achieve this. I still expect to see the base rate fall before the summer.


Sources: Latest data from - Gov.UK, Bank of England, UK House Price Index, ONS and Property Mark (NAEA).

Andrew Boast of Sam Conveyancing
Written by:
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Caragh Bailey, Digital Marketing Manager
Reviewed by:

Caragh is an excellent writer in her own right as well as an accomplished copy editor for both fiction and non-fiction books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey and mortgage related articles.

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