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As we approach the end of the year, Zoopla’s latest UK House Price Index provides expert insight into what landlords can expect from the market in 2024. Will we see house prices drop, and where should you be looking to invest next?

Zoopla has published its latest UK House Price Index, giving landlords and property investors an insight into the outlook for 2024 and what they can expect from the housing market. Below, we examine how falling house prices will impact buyer appetite and the regional hotspots for landlords planning their next property investment purchase.

 

House Price Falls

The report found that the drop in house prices over the past year has been relatively modest compared to a 20% reduction in buyer ability. Higher mortgage interest rates and the cost-of-living crisis have both had a significant impact on buyer demand, which is down 20% over the year and 25% below October’s five-year average.

This drop in demand has resulted in a rapid slowdown of house price growth, from +9.2% last year to -1.1% today. Across Zoopla’s localised house price indices, 4 in 5 housing markets report annual house price falls, an increase from the 1 in 20 recorded just six months ago. Despite this, the falls are modest, with no markets registering drops over 5%. However, Zoopla anticipates that some markets across the UK will start to see annual price falls of over 5% in the coming months as prices continue to adjust, with buyer demand still on its downward trend.

 

Sales Transactions

Throughout 2023, housing transactions have taken a hit and are on track for a 23% drop in home moves. This equates to one million home moves this year, and Zoopla predicts we shall see the same number of transactions across 2024.

Many households are putting off moving homes or cannot afford to purchase with rising mortgage interest rates. This drop in sales is unanimous across the UK and different property types. Zoopla’s report found an increase in people now ‘less eager to move’, citing market uncertainty and the expectation for further house price drops.

Next year, Zoopla anticipate the usual seasonal rebound in the spring for buyer demand. However, the current pipeline for sales is lower than this time last year. Furthermore, Zoopla notes that the general election is also likely to stall activity. Conversely, if mortgage rates drop to circa 4% earlier than expected, we may see an increase in sales transactions.

 

Who’s purchasing property?

Perhaps unsurprisingly, the number of cash sales is holding steady this year, accounting for 32% of sales in 2023. However, it’s first-time buyers who are set to be the largest buyer group of the year. Whilst the share of first-time buyers’ sales is down on recent years, it still holds up as rising rents continue to incentivise many tenants to look to buy. In markets with lower house prices in particular, many first-time buyers are finding their mortgage repayments are cheaper than rental costs, despite 5.5%+ mortgage interest rates.

 

Buyer Appetite

Many homeowners are concerned about the rise in their mortgage payments that a higher mortgage interest rate will bring. Similarly, many have faced increased household costs due to the cost-of-living crisis and rising inflation. These factors combined have stunted buyer demand over the past year. However, as income growth starts to return as inflation drops, there are signs that buyer appetite will return to the market.

Zoopla anticipates that cash buyers and first-time buyers will remain large buyer groups next year. The group most affected by the increase in mortgage interest rates are upsizers, who Zoopla notes now need to be more flexible about what they’re looking to buy and where. If there are more upsizers in the market in 2024, overall sales volumes should see positive growth.

 

Where should you invest in 2024?

For landlords looking to invest in a new property, Zoopla’s report highlights key regional data for where has seen the highest annual change in house prices. Scotland and Northern Ireland were the only regions with a positive annual change in house prices, at 1.2% and 1.1% respectively.

Across the rest of the UK, regions recorded growth between -0.1% in the North East and Yorkshire and the Humber, to -2.4% in the East of England. In terms of cities, just eight saw positive annual change in house prices, with Edinburgh, Glasgow, and Belfast taking the top spots. Conversely, Southampton, Cambridge, and Bournemouth performed the worst, with -2.0%, -2.3% and -2.6% respectively.

If you’re considering investing in property, it’s worth paying close attention to how regions have performed over the year. With rents still rising, you may be able to find a good quality property at a competitive price and be able to earn significant rental yields off the back of your next investment. Speak to one of our expert brokers to get started.

 

What does the outlook for next year mean for landlords?

Despite the drops we’ve seen in house prices and transactions, and the impact of the wider economic market on buyer appetite, Zoopla’s report closes with a positive outlook for the next year. The report notes that there’s ‘Scope for a rebound in activity as affordability improves’. Zoopla goes on to say that the housing market is adjusting to higher mortgage interest rates through lower sales as opposed to a significant drop in house prices, which has kept the sector steady.

For landlords worried about the market's stability, Zoopla notes that with mortgage interest rates starting to decrease, the outlook for buyer affordability remains optimistic. Zoopla comments: “Assuming mortgage rates remain at this level (4-5%), we see UK house price falls remaining in the low single digits for the next 1 to 2 years”.

Zoopla concludes that they expect an initial rebound in activity in the first six months of 2024 as those who had delayed moves due to a spike in mortgage rates return to the market. With the number of homes for sale at a five-year high, sellers will need to price accurately if they’re serious about selling, which should keep pricing competitive.

But the outlook does look more positive. Landlords now have an opportunity to take advantage of current low property prices. With rental demand rising and mortgage interest rates expected to come down towards this time next year, it’s an opportune time to expand your portfolio by purchasing new investments. 


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If you’re looking to purchase your next property investment or would like to discuss your remortgage options, speak to one of our expert brokers by submitting an enquiry or call us on 0345 345 6788.

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