House prices are expected to fall to 2% over 2024, as modest price falls over 2023 have not been enough to help reset affordability and support more sales, Zoopla predicted.
Next year rising incomes should steadily improve affordability.
Four in five local housing markets registered price falls, although the scale of price falls is limited to below 5% in all markets.
Richard Donnell, executive director at Zoopla, said: “House prices have proven more resilient than many expected over the last year in response to higher mortgage rates. However, almost a quarter fewer people will move home due to greater uncertainty and less buying power.
“Modest house price falls over 2023 mean it’s going to take longer for housing affordability to reset to a level where more people start to move home again. Income growth is finally increasing faster than inflation but mortgage rates remain stuck around 5% or higher. We believe that house prices will post further small falls, averaging 2%, over 2024 with 1m home moves.
“Slow house price growth and rising incomes over the next 12-18 months will improve affordability to levels last seen a decade ago, creating the potential for a rebound in home moves as consumer confidence returns. “
The scale of house price falls is limited to low single digits, with the largest annual falls registered in commuter towns around London and across the South East – for example -3.5% in Colchester and -3.3% in Luton.
Of the one in five markets registering annual house price growth, the highest growth rate is 3.6% in Halifax in Yorkshire.
Currently, the number of housing sales is feeling the impact of higher mortgage rates more than house prices – with a 23% reduction in housing sales in 2023 vs 2022.
Zoopla anticipates housing transactions to stay flat at one million in 2024, although this could improve if mortgage rates drop back towards 4% over the first half of 2024.
This would support a modest rebound in activity in the first half of 2024 as people who have delayed moving decide to return to the market.
