The Nationwide says 2023 has seen a surprisingly-resilient housing market but there will be no full scale recovery in 2024 - thanks to stubbornly high interest rates.
“Housing market activity was weak throughout 2023. The total number of transactions has been running at about 15 per cent below pre-pandemic levels over the past six months, with those involving a mortgage down even more - around 25 per cent - reflecting the impact of higher borrowing costs. On the flip side, cash transactions have been running above pre-Covid levels” explains Robert Gardner, Nationwide’s chief economist.
“This subdued picture was also reflected in house prices, which in November were two per cent lower than the same period in 2022, and 4.3 per cent below the all-time high recorded in late summer 2022.
“Even though house prices are modestly lower and incomes have been rising strongly, at least in cash terms, this hasn’t been enough to offset the impact of higher mortgage rates, which are still more than three times the record lows prevailing in 2021 in the wake of the pandemic. As a result, housing affordability is still stretched.
He says a borrower earning the average UK income and buying a typical first-time buyer property with a 20 per cent deposit would have a monthly mortgage payment equivalent to 38 per cent of take home pay – well above the long run average of 30 per cent.
Looking ahead to next year, Gardener comments: “There have been some encouraging signs for potential buyers recently with mortgage rates edging down. Investors have become more optimistic that the Bank of England has already raised rates far enough to return inflation to target and will reduce rates in the years ahead. This shift in view is important, as it has brought down longer term interest rates which underpin fixed mortgage rate pricing.
“Nevertheless, a rapid rebound in activity or house prices in 2024 appears unlikely.
“While cost-of-living pressures are easing, with the rate of inflation now running below the rate of average wage growth, consumer confidence remains weak, and surveyors continue to report subdued levels of new buyer enquiries. Moreover, while markets are projecting that the next Bank Rate move will be down, there are still upward risks to interest rates. Inflation is declining, but measures of domestic price pressures remain far too high.
“It appears likely that a combination of solid income growth, together with modestly lower house prices and mortgage rates, will gradually improve affordability over time, with housing market activity remaining fairly subdued in the interim. If the economy remains sluggish and mortgage rates moderate only gradually, as we expect, house prices are likely to record another small decline (low single digits) or remain broadly flat over the course of 2024.”
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Today's inflation figure - 3.9% - makes interest rate cuts & therefore lower mortgage rates more likely. This will boost the housing market. I predict a stronger recovery than NW.
Well there is surely some pent up demand from people who have put things off due to all the bad news. People in jobs have had some decent pay increases. So sooner or later things will pick up. No thanks to the Bank of England or the Govt mind you.
People on benefits have had bigger rises than most workers.
I have been concerned house prices will slump considerably with the high rates and stagnant economy - plus the fact that all bubbles burst without fail (we've certainly been in a bubble post-covid 2021/22. You only have to look in to car prices in the last month or two to see the time is here).
However, because of the inflation, there is a good chance house prices will remain high (perhaps with a slight correction - as we are seeing now in some areas). Wage rises will help weather that storm too.
There's also a risk that, when rates come back down, we get another boom of buyers and this will trigger further inflation.
HOWEVER! There is certainly no "soft landing" coming - anyone who ever quotes this is uneducated in economics. The economy in general is recessing spending (i.e. recession!) But, it's a correction at the end of the day. It's necessary. Google interest rates vs recession. It's a 95% certainty IMO. Then if you still don't believe me, research the "inverted yield curve". Recession is carved in stone in to the near future, but it takes time to hit (like a slow moving train wreck).
Most main retailers in the UK have started Christmas sales weeks earlier this year - because people are not spending - they're cutting back - they are skint - with no help thanks to food, energy and interest rates on credit cards etc. That means lower profits for companies, which means job cuts. That is when recession starts and rates will drop (at a very fast rate). But the government need you to keep spending (they make taxes from your spending) so they'll continue to tell you everything is fine.
Batten down. It'll be bumpy. But we will thrive again. It's a just cycle. But I do fear for the over-leveraged with credit card debt coming out of their noses (if they lose their job, then they could lose a whole lot more). Especially when you look at past recessions and what it does for depression and suicide rates. But, again, governments won't warn you - they'll let people ruin their lives, because they need you to spend because it makes them money.
I wouldn’t be surprised who would go Bankrupt or commit suicide with the full scale unjustified attack on Private landlords by local Authorities driving is out deliberately by the thousands for sure they want homeless everything they done this far has had that affected. When is the last time you applied for a License if not recently you’ll find out making it not worth while.
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