2024: The Year of Falling House Prices and Rising Rent

New build houses alongside a canal
Author: Samuel Beckingham
Updated: Jan 10, 2024
4 minutes read

UK Finance has revealed that 2024 will be the year where house prices will fall by almost 5%, but rents could increase by 5–6%. The benefits gained by renters of cheaper properties will be lost by those then unable to save enough money for a deposit.

Slow Economy

The economic slump that the UK has been facing over the last few years is not likely to massively improve this year. This also means that the housing market will be impacted as well. With less job security, confidence in buyers will be severely undermined, not least because any rent increases are expected to outweigh wage rises.

In addition to this, it’s still expected that interest rates will remain at elevated levels for longer, forcing many of the 1.6 million people whose fixed rate deals are soon to expire this year onto a worse rate. UK Finance sent out a grim warning that lending will decrease and more households will fall into arrears.

Change in House Prices

Nationwide is expecting 2024 to be a relatively flat year for house prices. With the likelihood that prices will remain unchanged or fall around 2%, their forecast is more optimistic than the Office for Budget Responsibility (OBR). Back in the Autumn Statement, the OBR was predicting a drop of 4.7%. On the other hand, Halifax predicted a 2–4% decrease.

Is now a good time to buy?

The mass unaffordability of increased mortgage rates is troubling the market. It’s expected that the number of homeowners forced into arrears will shoot up from 105,600 to 128,800 by the end of 2024.

Pressure on Rents

The rental crisis has highlighted the challenge of shortages against the backdrop of rising prices. With competition so fierce and more landlords exiting the sector, renters have only suffered more and more. Some rents have even been compensating for the high interest rates to offset increases the landlord has been facing in their mortgage.

It’s widely expected that new lets will keep rising, but more slowly than recent cases have seen. According to Zoopla, rents for new lets increased by more than 10% for the 20th month in a row. This was mostly fuelled by rental controls in Scotland as landlords aimed to increase how much they could get before new tenants arrived. The North West, London and Wales also featured increases of more than 10%.

The light at the end of the tunnel for Zoopla comes with the 5% increases they’re forecasting for the end of 2025. If rents were to fall to this level, it will only be the slowest increase seen since 2021.

Lack of Properties

Estate agents have been pretty down on when the availability of rental properties is likely to increase. Because of mounting costs, many landlords have sold their properties already and this move is unlikely to be reversed any time soon.

Because interest rates have been incredibly steep, until they have stabilised at lower levels, landlords are unlikely to be enticed back into the market. This causes a huge knock-on effect in an already tested field, where demand far outpaces supply. At this rate, any significant change isn’t expected until at least 2026.

Looking to increase home value in 2024?