House prices to rise 2.5% in 2024, but glut of homes for sale will limit further growth

According to Zoopla, house prices are expected to end the year 2.5 per cent higher than when it started, but sellers are still being warned not to set their asking prices too high.

It is a more optimistic forecast from the real estate portal, which predicted earlier this year that prices would fall by 2 percent.

The property website found that house prices rose 1.4 percent in the first seven months of 2024, compared to just 0.1 percent in the same period last year.

Falling mortgage rates are causing the housing market to revive.

With some buyers now able to secure a five-year fixed rate mortgage for less than 4%, Zoopla says there are 20% more buyers looking than this time last year, when the lowest five-year fixed rate mortgage rates were above 5.25%.

Zoopla says this has unsurprisingly led to a rise in sales, with the number of agreed sales up 23 per cent on last year.

While activity has recovered somewhat, the large number of homes on the market and mortgage rates that are still higher than many people are used to mean prices remain low.

Sellers are still being advised to be sensible with their asking price, as one in five homes had to reduce their asking price by 5 percent or more in August.

According to Zoopla, the number of houses for sale has risen to its highest level in seven years, with the average estate agent having 33 houses for sale.

That means it’s still a buyer’s market.

One in five sellers lowers their asking price by 5 percent or more, and it takes twice as long to sell a home if the price is too high.

Zoopla experts expect that buyers will have more choice and that this will keep house price inflation under control in 2024 and 2025.

Richard Donnell, Director at Zoopla, said: ‘The sales market continues to grow as mortgage rates fall and more sellers gain the confidence to put their homes up for sale.

‘Buyers have much more choice, which benefits sales figures, but it also keeps price increases within limits.’

Mortgage rates are driving buyers to look for bargains

Although house prices are rising slightly, buyers remain price sensitive as mortgage rates remain high.

According to Zoopla, this is slowly being offset by faster income growth, but there is still much to be done before affordability is fully restored.

This explains why one in five homes saw their asking price reduced by 5 percent or more in August to attract more buyer interest.

Homes that require a price reduction take twice as long to sell as homes without a price reduction.

A separate analysis of property sales over the past five years by Rightmove found that they are twice as likely to fail to sell and never sell at all.

Like Zoopla, Rightmove says many sellers are still asking for far more than their home is actually worth.

Richard Donnell from Zoopla added: ‘We’ve found that it takes around 28 days to close a sale if the asking price hasn’t been reduced. But sales take an average of 73 days if the asking price has been reduced by 5 per cent or more to create demand.

‘It is essential to set the right asking price from the outset so that serious sellers can achieve a quick sale.

“If you have to lower the asking price by 5 percent or more, it will take twice as long to sell your home, or you may not sell it at all.”

North-South house price gap persists

According to Zoopla, the improvement in house prices over the past year has been noticeable in most parts of the country.

However, there is still a North-South divide, with prices rising in the North.

In the 12 months to July, house prices rose in eight regions, but fell in four.

Average house prices are up 0.9 percent year-on-year in the East of England, 0.7 percent in the South East and 0.6 percent in the South West.

In London and the East Midlands, prices have remained virtually unchanged compared to 12 months ago.

House prices are rising faster than the national average in markets with cheaper and more affordable housing, often close to larger cities in England.

In Wolverhampton, prices have risen by 3 percent year-on-year, in Oldham by 2.8 percent and in Wakefield by 2.7 percent.

House prices are rising even faster in Scotland. In Dumfries and Galloway they are up 4.4 per cent year-on-year, while Galashiels and Falkirk are both up 3.1 per cent.

What is the future for house prices?

Zoopla isn’t alone in predicting that house prices will end the year higher than they started.

Real estate company Knight Frank also predicts that house prices will end on a positive note.

Tom Bill, head of UK housing research, said: ‘The simple equation for the housing market this autumn is that buyer demand will increase as mortgage rates continue to fall.

‘With underlying inflation coming under control, more mortgages below 4 per cent emerging and further interest rate cuts expected before Christmas, we expect UK house prices to rise by 3 per cent this year.

‘Financial pain will continue as buyers and sellers push back on favourable rates and uncertainty over the October budget means there is little room for price increases.’