Market update – December 2023

The end of the year is looming, so property professionals and other forecasters are publishing their final reports for 2023 and looking ahead to 2024. How are the residential sales and rental markets looking as we enter the new year?

• The Office for Budget Responsibility has forecast a 4.7% fall in house prices next year. This would take the average house price to £266,000 in Q4, 7.6% below the peak price in 2022 – and the OBR doesn’t expect prices to reach that peak again until 2027.
• Private sector predictions are mostly more optimistic. Chestertons expects a 0.3% house price drop next year, while property platforms Rightmove and Zoopla forecast 2% and 1% falls respectively. But not everyone in the private sector agrees: Knight Frank expects house prices to decline by 5%.
• Halifax’s latest monthly figures will be fuel for the optimists. Prices rose by 0.2% in November, marking three straight months of month-on-month rises. The bank also predicts that interest rates will soon start to ease, improving affordability and allowing prices to rise further.
• House prices may be down, but rental growth appears to be strong – a pattern PayProp has also reported on further afield in Canada. Chestertons measured a 6.5% increase this year, and expects them to rise by another 5% next year. Meanwhile, Savills has projected a massive 9.5% increase for 2023, the second highest growth they have ever recorded after 2022’s 11.2%. The estate agency chalks that up to a shortage of homes to rent, and expects another 6% growth next year.
• While more home sellers are cutting prices to attract buyers in a slow market, renters are bidding against each other to secure a home. The New Economics Foundation think tank says that 39% of new renters paid at least £100 per month over the asking rent in 2023.
• The big question now is how high rents can go. Savills expects them to hit an affordability ceiling in the near future, suppressing rental growth from 2025 onwards.