UK house prices experienced a 1.7% increase overall in 2023, with the average property price rising by +1.1% in December alone.
The typical UK home now costs £287,105, which is £3,066 more than in the previous month, marking the highest price point since March 2023.
However, the outlook for 2024 is cautious, with predictions indicating a potential fall in house prices by -2% to -4%.
Kim Kinnaird, director at Halifax Mortgages, said: “The housing market beat expectations in 2023 and grew by +1.7% on an annual basis.
“Whilst it’s encouraging that we saw growth in the last three months of the year, this was preceded by property price falls for six consecutive months between April and September.
“The growth we have seen is likely being driven by a shortage of properties on the market, rather than the strength of buyer demand.”
Northern Ireland and Scotland witnessed the strongest growth, with property prices in Northern Ireland climbing by +4.1% to £192,153.
In contrast, the South East experienced the sharpest decline, with an average price drop of -4.5%, equating to –£17,755.
Despite a decrease in annual prices, London continues to hold the highest average house price in the UK at £528,798, though it has seen a 2.3% fall over the year.
Kinnaird said: “As we move through 2024, the UK property market will continue to reflect the wider economic uncertainty, and forecast uncertainty remains high given the current economic climate.”
Reaction
Sofia Jones, managing director at London-based independent mortgage broker, Penny House:
“2023 was the most challenging year for borrowers that I have seen, with interest rates shooting up quickly. However, November and, to a greater extent December, saw confidence rebound sharply as mortgage rates came down in earnest. That was no ordinary December.
“The acute increase in demand was reflected by Rightmove’s record traffic figures on Boxing Day.
“January has kicked off with numerous rate cuts from lenders, and agents are busy with buyers.
“In my opinion, we will see a relatively short window for these buyers looking to get a good deal and it will soon be a sellers’ market again.
“The lack of supply is definitely a key factor in supporting prices but demand is now back, too. The end of 2023 was the polar opposite of the beginning and I’m optimistic for the market in 2024.”
Mike Staton, director at Mansfield-based broker, Staton Mortgages:
“December was an absolute humdinger. We are coming off the back of our busiest December as a business and the busiest start to a year that we have ever had. Mortgage rates are decreasing with each day that passes, creating even more demand.
“This is on top of buyers coming to terms with the reality of our current economic situation and the fact that the rates we now have are the new normal.
“Our diaries are booked out for the next two weeks, which is a long time in the mortgage industry.
“I am very excited about 2024 and the future is looking far brighter than this time last year, as we were still shellshocked by the mini-Budget.
“Whilst social media is awash with unqualified nay-sayers spouting bile about true house prices dropping, house prices and sentiment are both on the up. I for one am not concerned.”
Charles Breen, founder at Wellingborough-based mortgage broker, Montgomery Financial:
“December saw a renaissance in the property market. The Halifax figures certainly support this. It literally went from the Dark Ages to modernity in just one short month.
“Lenders were proactive in cutting rates, and people have now adjusted to the new normal and accepted rates as they are.
“It sounds dramatic but it genuinely felt like the market was reborn last month, and this month, based on the activity levels we’re seeing, is definitely following suit.
“I am full of optimism for the coming year and I think we may see a buying frenzy similar to post-Covid as there is an awful lot of pent-up demand.”
Rhys Schofield, director at Belper-based Peak Mortgages and Protection:
“I’m going to throw it out there. I think house prices will marginally increase this year, despite the Halifax forecasting a fall of between -2% and -4% in 2024.
“We still have a shortage of housing that’s not going away and with mortgage rates looking more affordable, demand will increase.
“Front-end activity is brisk, and I don’t think we’ve ever had more enquiries between Christmas and the New Year. We’re less than a week into 2024 and it’s already a blinder.”
Gary Bush, director at the Potters Bar-based MortgageShop.com:
“The property market is showing promising signs of recovery. We expect to see homeowners more confident and looking to step up the ladder in 2024, which will release a good amount of quality stock for the bottom end of the market.
“This is likely to bring further increases in prices. With mortgage rates on a seemingly inexorable downward trend and the markets expecting a base rate cut in the near term, greater transaction volumes will assist the upward trajectory of prices this year.
“We are seeing a fair amount of Shared Ownership transactions now that the bones of Help to Buy have rightly been laid to rest.”
Bob Singh, founder at Uxbridge-based broker, Chess Mortgages:
“With Rightmove reporting record views on Boxing Day, it appears that buyer interest has been piqued by the prospect of lower borrowing costs in 2024. On the other hand it’s panic stations for those coming off ultra-low fixed rates and facing significant increases in their mortgage payments.
“2024 will prove to be a pivotal year as it’s not without its challenges with many geo-political factors still able to derail the markets. Many brokers have seen a huge uptick in enquiries this year and that will no doubt translate into purchases at some stage and help house prices recover.”
Craig Fish, director at London-based broker, Lodestone Mortgages & Protection:
“2023 was very challenging for those looking to finance or refinance property, which resulted in price reductions across the board, though these weren’t as deep as many expected. As the year drew to a close, the mood music started to change, with affordability improving due to lower rates, and as a result the value reductions gradually slowed.
“2024 is looking to be a far more positive year, though many will tread with caution and as such it’s likely that values will remain subdued. The fact that house prices in the South East saw the most downward pressure reflects the fact that they were higher in the first place.”
Darryl Dhoffer, director at Bedford-based broker, The Mortgage Expert:
“December buzzed with demand, leaving many in the property and mortgage industry to work right up to Christmas Eve. But there are still a number of challenges ahead. Lower mortgage rates will attract more buyers, boosting prices, but a sudden and unexpected base rate hike if inflation doesn’t play ball could crash the party.
“A harmonious global economy could sustain growth, while a discordant recession could dampen demand. Limited supply keeps prices buoyant, but a surge of new listings could favour buyers. Though sentiment is up, there are still a lot of variables in play. Interest and mortgage rates, inflation, the economy and stock levels will all contribute to what happens to prices in 2024.”
Riz Malik, founder at Southend-on-Sea-based broker, R3 Mortgages:
“Last year was the most challenging for borrowers in the history of my company. However, in the coming weeks, we should gain clarity on the borrowing environment for 2024 as lenders rush to adjust rates in response to economic conditions.
“Although it may take some time, optimism is expected to rebound sharply among potential movers. The upcoming Budget, potentially offering additional incentives, may further contribute to encouraging trends.”
Jamie Alexander, director at Southampton-based Alexander Southwell Mortgage Services:
“Lenders are quickly adjusting rates in response to falling inflation and expectations of a rate cut. It might take a bit, but we’re optimistic that potential movers will start feeling hopeful again. And there’s the upcoming Budget, which might throw in some extra perks and add to the positive vibes.
“December saw a fresh wave of interest from buyers. Lower mortgage rates seem to be the driving force behind this renewed enthusiasm. Many buyers, holding off in the summer and early autumn due to high rates, are finally making their moves now.”
Joe Garner, founder at London-based property consultancy, Joe Garner Consulting:
“Demand for property is strong as the window shoppers and voyeurs drop out of the market with only serious, qualified buyers left. House prices will remain turbulent as the supply of ex-buy-to-let properties continues to flow.
“The trajectory of house prices will be governed by qualified demand. Demand always outstrips supply but stricter affordability criteria among lenders has created a bottleneck in demand.
“As soon as the blockage is released either by rates dropping further or the introduction of a Government-backed guarantee scheme, activity levels will pick up in earnest. Every buyer has their maximum and every seller has a bottom line number they can’t go below. Everything in between is just negotiation.
“The key theme in the housing market is always that we don’t have anywhere near enough good quality housing available to meet the needs of an ever-growing and ageing population.”
Mark Harris, chief executive of mortgage broker SPF Private Clients:
“The housing market saw a remarkably strong finish to the year, as buyer and seller confidence was boosted by three consecutive interest rate holds and the growing belief that the next move in rates will be downwards.
“Increased competitiveness among lenders leads to lower mortgage rates and we find ourselves in the midst of a price war. With HSBC launching the headline-grabbing 3.94 per cent five-year fix and reductions from Halifax, NatWest, TSB and other lenders, the gloves really are off.
“With 2023 being a disappointing year in terms of amount of business done, lenders are keen to get this year off to a cracking start. Increased competition, rates aside, may also lead to lenders broadening criteria to attract business with longer mortgage terms or greater flexibility to allow certain variable incomes. It is great news for borrowers who have struggled with affordability over the past few months as they may now be able to achieve their target loan amount where they couldn’t before.
“Although those remortgaging this year will still see an increase in their payments, the pain will not be as bad as it could have been. It remains important to seek advice from a whole-of-market broker and plan as far ahead as possible.”
Anna Clare Harper, CEO of sustainable investment adviser GreenResi:
“For homeowners and aspiring homeowners, a modest reduction in average prices can trigger wide-ranging emotions. The truth, though, is that house prices are a simple, scientific reflection of supply and demand.
“This modest 1.7% annual house price increase reflects the calming impact on demand of higher interest rates.
“For investors who are not reliant on bank finance, there are plenty of opportunities to buy at attractive prices as competition is much reduced.”
Alan Davison, director of customer sales at Together:
“Today’s rise in house prices will be a welcome change for many, offering hope that the weak buyer demand seen last year will start to improve steadily as 2024 activity picks up.
“And, with housing secretary Michael Gove again intimating more help for first-time buyers will be delivered before the possible general election this year, we may see more of them take their first steps onto the housing ladder.
“Where mortgage rates track as we move into 2024 will dictate what the majority of buyers and sellers in both the residential and commercial sides do next. There are opportunities for those willing to take them; first-time buyers in particular can take advantage of schemes like shared ownership and right-to-buy to achieve their property ambitions this year.
“On the Buy-to-Let (BTL) side, landlords will still be facing higher operating costs with many weighing up their ability to provide a continued supply of good quality, well maintained rental properties or whether exiting the market is worthwhile.”
Nathan Emerson CEO at Propertymark:
“It is positive to see that house prices have gone up gradually month on month and also year on year, especially as borrowing costs are being affected by higher interest rates on mortgage affordability.
Before 2023 ended, the Bank of England’s decision to maintain interest rates should be providing further confidence to buyers looking to make their next or first home move in 2024. We would now hope that the Bank of England gradually starts slashing interest rates in order to further stimulate growth in the housing market.”
Karen Noye, mortgage expert at Quilter:
“Figures from Halifax this morning reveal house prices saw a monthly uptick of 1.1% at the end of 2023, the third consecutive monthly increase, resulting in a 1.7% increase year on year. House prices consistently defied expectations that they would plummet throughout 2023, and this uptick highlights just how resilient the housing market has been over the last year despite the volatility it has faced.
“As we look ahead to the rest of 2024, the housing market turmoil seen over the past couple of years is expected to dissipate further. Many lenders have been reducing their mortgage rates as swap rates have lowered, and lower transaction levels have prompted healthy competition between lenders vying for business. This could lure prospective buyers back to the market and further prop up house prices. Figures from the Bank of England released just yesterday echo this, as net mortgage approvals for house purchases rose from 47,900 in October to 50,100 in November showing demand is making a slow return to the market.
“2023 was an incredibly tricky year for the housing market as high interest rates and cost of living pressures saw many put house purchases on hold, but it appears to have weathered the storm well. Though Halifax has predicted a fall in house prices of between -2% and -4%, the overall outlook for 2024 remains relatively optimistic.
“Affordability will still be challenging this year given higher interest rates, but a reduction in mortgage rates has already started to materialise and those looking to secure a fixed-rate mortgage may find that deals continue to become more palatable in the coming weeks and months, though rates will still be much higher for those coming off long term deals from the period of very low interest rates.
“We are likely to see gradual, small changes as opposed to a significant fall, but lenders are updating their product ranges regularly and we are generally seeing further reductions each time they do. For those looking to purchase a new home this year, it will be vital to seek professional mortgage advice to ensure you are making the best possible decisions for your circumstances.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman:
“Although reflecting activity over the past few months, the Halifax survey has enjoyed a deserved reputation as a bellwether of housing market health.
“Prices are continuing their albeit modest upward trajectory despite the twin headwinds of inflation and interest rates. Bearing in mind too, these figures don’t include around a third of buyers who are not dependent on mortgages.
“Shortage of stock and wage growth exceeding the cost of living continue to support property prices.
“Looking forward, confidence to take on debt is improving with average mortgage rates now at their lowest for several months and the prospect of further encouragement for buyers in the Budget only partly tempered by growing election talk.”
Gareth Lewis, managing director of property lender MT Finance:
“It comes as no surprise that house prices have risen slightly over the past three months, given that the period before then saw price reductions reflecting consumer unease when it came to something as monumental as a property purchase on the back of rate fluctuations and wider economic uncertainty.
“We have certainly felt that towards the end of 2023 confidence and stability started to return. However, we must be mindful that we are yet to feel the wider distress that is expected as homeowners roll off low fixed rates into a higher interest rate environment.
“Higher distressed sells could see house prices soften through 2024 but there is still pent-up demand from consumers looking to purchase combined with low levels of stock, which could provide a stabilising impact.”
Jonathan Samuels, CEO of Octane Capital:
“A freeze on interest rates has certainly helped to steady the ship and not only have we seen mortgage approvals start to climb, but house prices are now starting to follow suit.
With the base rate remaining at its highest since 2008, we’re not yet out of the woods, but we can now see the light through the trees and it’s difficult to anticipate anything other than further positivity on the horizon in 2024.”
