House prices forecasted to dip further but 5% recovery expected in 2024

UK house prices are predicted to experience a decline over the upcoming six months due to ongoing affordability challenges.

Nonetheless, a sharp fall in mortgage rates is anticipated in 2024, particularly if the Bank Rate decreases by 0.75% from Q2 as projected by Pantheon Macroeconomics.

After a significant 6% peak-to-trough drop in house prices, there is an expectation of a rebound starting from Q2, culminating in a 5% rise by the end of 2024.

Gabriella Dickens of Pantheon Macroeconomics said: “The official measure of house prices has so far been remarkably resilient in the face of elevated mortgage rates. On a seasonally adjusted basis, prices rose by 0.2% month-to-month in August, reducing the scale of the decline since their November peak to just 1.0%. Prices are still a hefty 25% above their 2019 average.”

However, doubts persist regarding the official measure’s ability to maintain its current trend. A noticeable impact on affordability and demand signifies a potential material decline in house prices.

The 2-year fixed-rate mortgage rate, even with its slight recent decline, remains considerably higher than figures recorded two years prior.

Pantheon Macroeconomics’ detailed report also highlights the pressing issue of house-purchase affordability, which is projected to see a significant improvement in 2024.

This change will likely bolster the recovery in house prices, with other economic factors, such as potential Bank Rate adjustments and real disposable income increases, playing pivotal roles.

In light of recent data, a rise of 5% in house prices is projected for the last three quarters of 2024, almost negating the imminent short-term decline.