British home prices to dip again in 2024 but no crash expected: Reuters poll
Reuters
Published Nov 29, 2023 07:35AM ET
By Jonathan Cable
LONDON (Reuters) - British home prices will fall again in 2024 after dropping 4% this year as the Bank of England keeps interest rates higher for longer, eroding how much buyers can afford to borrow and deterring some from entering the market, a Reuters poll found.
The COVID-19 era of record low borrowing costs and a desire for more space drove a boom in home prices that later fizzled out as the BoE embarked on an aggressive rate hiking campaign to tame consumer price inflation.
Policymakers have raised Bank Rate by more than 5 percentage points in under two years to 5.25%, making once-cheap mortgage rates a lot more expensive. The Bank Rate is not expected to fall until well into next year.
Average home prices were expected to drop 4.0% this year and 2.0% next before rising 3.0% in 2025, medians in the Nov. 15-29 poll of 18 property market experts showed. In a poll published in September those forecasts were -4.0%, 0.0% and +3.3%.
"Lower mortgage rates and real income growth should start to put a floor under further price falls. Even so, a deteriorating economic picture will likely mean prices remain flat in 2024," said Aneisha Beveridge at estate agency Hamptons.
The most pessimistic forecaster for next year predicted a 7.5% drop while the most optimistic saw a 5.0% rebound.
London homes, still a big draw for foreign investors, will fare better than nationally and only fall 3.7% this year and a more modest 0.5% in 2024 before rising 4.3% the following year.
"In a dangerous world and an increasingly hot world - Brazil has just recorded its record temperature of 44.8 degrees Celsius - London looks set to regain its position as a 'supplier of choice' for international residential buyers," said Tony Williams at consultancy Building Value.
Shares in high-end developer Berkeley, which has a larger exposure to the capital than its peers and is seen as a bellwether of the London market, are up more than 20% this year.
Despite borrowing costs remaining high - a separate Reuters poll suggested they would not start to fall until at least July and even then only gradually - a more than 85% majority of respondents to an extra question said purchasing affordability for first-time buyers would improve over the coming year.
"With prices falling in both real and nominal terms and wages rising we expect affordability for first-time buyers will improve on current levels. We also expect more competitive rates in 2024 will help," said Marcus Dixon at real estate management firm JLL.
Lenders have accelerated mortgage price cuts as competition intensifies and slowing inflation increases market bets on future rate cuts.
Some homebuilders such as Persimmon (LON:PSN) have also said they expect to build more properties this year than previously thought, although rival Barratt said annual building targets would be 20% lower than last year.
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The bulk of specialists who answered another question - 10 of 13 - said the proportion of homeowners to renters would increase.
"As well as security of tenure the attractions of being a first-time buyer in 2024 will increase as mortgage costs fall but rents continue to rise," said Ray Boulger at mortgage broker John Charcol.
Private rental prices rose 6.1% in the 12 months to October, the biggest annual increase since data collection started in 2016, data from the Office for National Statistics showed earlier this month.
(Other stories from the Reuters quarterly housing market polls)
Written By: Reuters
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