MHHG estate agents

Market Overview
The UK housing market has shown signs of improvement throughout the first half of 2024. With mortgage rates adjusting to over 4%, the market has become the most balanced it has been in the past five years. Increased activity from sellers and buyers, along with a higher proportion of the asking price being achieved, indicate growing confidence in the market.

House Prices and Inflation
House prices have seen a slow rise across all regions and countries of the UK, reversing the declines recorded in 2023. The UK house prices edged up by 0.1% over the past year, increasing the average house price by £310 to £265,600. The annual price inflation varies significantly, from -1.2% in the East of England to +3.9% in Northern Ireland.

The expectation is that house prices will continue to rise slowly in the second half of 2024, potentially reaching an annual inflation rate of +2% by the year's end. However, affordability remains a significant constraint, especially in southern England, necessitating a period where household income growth outpaces house price increases. Household incomes are forecasted to grow by 4.5% in 2024, with expectations of continued growth in 2025.

Supply and Demand Dynamics
The supply of homes for sale is at its highest in six years, with the average estate agent having 33 homes available, a 16% increase from last year. This rise in supply offers more options for buyers and supports higher sales volumes. Many sellers are also buyers looking to upsize or find better value properties.

Interestingly, over 1 in 10 homes for sale were previously rented. Although many of these properties leave the rental market, around 40% remain, either bought by new landlords or retained by existing ones.

Sales and Buyer Behavior
The number of sales agreed is up 16% year-on-year, reflecting a more balanced market with increasing sales volumes and stable price inflation. Buyers are currently paying 96.8% of the asking price on average, an improvement from 95.4% in November 2023. In monetary terms, this translates to an average of £16,600 below the asking price for sales agreed in June 2024, compared to £23,000 below in October 2023.

In southern England, where higher mortgage rates have had a more significant impact, buyers were paying less than 95% of the asking price last year. This has since recovered to 96.3%. In contrast, the rest of the UK has seen a more stable market, with buyers achieving 97.1% of the asking price.

Outlook for the Second Half of 2024
The forecast for the second half of 2024 is continued modest growth in house prices, particularly outside southern England where affordability issues are less pronounced. Sales are projected to reach 1.1 million in 2024, though this remains 10% below the 20-year average.

The timing of the first base rate cut is crucial, as it will likely boost consumer confidence and market activity rather than significantly reducing mortgage rates for new buyers. The recent King's Speech and government plans are not expected to materially impact the housing market in the next 12-18 months. Long-term benefits for homebuyers and renters will depend on economic growth and increased home building, though affordability and access to housing remain challenges for lower-income households.

Summary
The UK housing market in July 2024 shows positive trends of balanced growth and increased activity. While house prices are rising slowly and sales are up, affordability continues to be a key concern, particularly in southern England. The outlook remains cautiously optimistic with expectations of continued income growth and modest house price increases.