What does the property market have in store for us in 2024, read on for some thoughts . . .
2023 has certainly been a strange year. We have, undoubtedly, seen the sales market cool off somewhat yet still we see plenty of activity and hope for 2024. The usual lack of supply in the Calder Valley together with the ever increasing popularity of the Valley means we have a demand/supply disparity. This means we remain protected, to a large degree, from the national slowdown.
However, buyers needing mortgages are of course at the mercy of the banks and buildings societies who have, in 2023, increased the average mortgage rates from around 2% to around 6%. In the summer, rates were peaking at nearly 7% but mercifully, they have reduced a little.
There is hope now that mortgage rates have levelled off, the Bank of England base rate has remained unchanged since the peak in August this year, at 5.25%. Some even hope mortgage rates will fall in 2024, perhaps more likely if prices do fall but unlikely if prices continue to rise and we see inflation take hold again. Lenders have certainly been very nervous throughout 2023, often down valuing and certainly very wary of any potential negative equity issues. Most lenders are still demanding a 10% deposit for mortgages, which is why First Time Buyers are generally 30+ now. To raise the deposit to buy takes time, a good salary and secure employment. Help from family is a standard thing with First Time Buyers today.
The irony is, of course, that whilst First Time Buyers are struggling to save big deposits, they are paying the highest rents on record. A comparison site published on BBC News only today shows that all bar one region of the UK (East of England) average rents are higher than average mortgage costs. Moreover they are taking out mortgages for 30 and 40 years and borrowing 4 and 5 times salary to afford the prices.
If you don’t agree our housing market is broken, then pay attention to the rental market as I do not think anyone can argue that doesn’t need major attention. In a year where the cost of living crisis is still prevailing, average rents increased by 6% in the first 8 months of 2023 with an annual increase estimated to come in at around 10%. Average private rents have apparently increased by 25% since the start of the covid pandemic and many believe we haven’t peaked yet. There have been many reports of potential tenants having to bid upwards to secure a rental property – due to the lack of supply and the fierce competition. Bidding in the sales market is not new but bidding for tenancies is a worrying factor. Generation rent is often banded about in the press, that’s because now one in five adults in England and Wales is renting in the private sector. Of these renters most are paying over 40% of their salary in rent – more than any country in Europe has reported.
Despite the rent increases, many private landlords have simply sold up and walked away this year. Higher borrowing costs affect landlords with Buy To Let mortgages, just the same as traditional home owners. Also the impact of potential legal reforms, costs of decarbonization and retro fitting our older housing stock coupled with modifications to tax benefits and mortgage interest relief mean costs for landlords have increased. Banks and building societies are offering much better interest rates to savers and so many feel this is an easier and sometimes safer option for their investments, hence they sell up.
The positive to landlords selling up, is that more homes are then available to the private buyer, often the First Time Buyer. But as we have already discussed, despite a slight drop in prices, affordability prevents most people taking their first step on the housing ladder. Studies have found that buying a home now is less than half as affordable as it was in the 1990s – based on comparing average earnings to average prices.
So predictions for 2024 are not too rosy but there is hope for anyone wanting to sell or let property, because we are lucky enough to live in an area that people are still flocking to. Whilst the economy is not expected to grow, perhaps 0.4% is the best estimate, many hope inflation will stabilise and so interest rates will stabilise. House prices Nationally may fall as much as 4 or 5% but this will vary from city to city, town to town and even street to street. The frenzied market that sprang up out of nowhere during the covid pandemic has settled down and 2024 will see more normal levels of activity. The housing market does not exist in a bubble – it is affected by the economy and political environment. We will of course, have a general election by December 2024 – perhaps sooner. That will be interesting!!
Have a lovely holiday and do get in touch if you are thinking of moving next year.
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