Monitoring the housing market is very important for many, particularly those doctors and dentists who are looking to purchase their first home or who are investing in buy-to-let properties. Our monthly Property Price Update gives you a summary of what the experts are saying.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
UK Property Market Update
At the close of 2023, UK house prices ended down 1.8% compared to December 2022. This price leaves house prices 4.5% below the all-time high record from the summer of 2022. Month on month, prices were flat. The average house price fell ever so slightly from £258,557 in November to £257,443.
Year in Review
Throughout 2023, housing market activity remained weak. Over the past six months, the total number of transactions have been running about 10% below pre-pandemic levels, with those involving a mortgage down even more — 20%. However, cash transactions continue to run above pre-Covid levels.
House prices are modestly lower, but incomes have also been rising, at least in cash terms, but unfortunately this hasn’t been enough to offset the effects of higher mortgage rates. Recently, mortgage rates hit three times the record lows from 2021, right after the pandemic. This means that housing affordability is still suffering. For example, nowadways a typical first-time buyer’s customary 20% deposit works out to about 38% of take-home pay, up from the long-run average of 30%.
This is only adding to the existing struggles of those trying to get on the property ladder, where barriers to entry are only increasing. Right now, a 20% deposit on a typical starter home is equal to about 105% of average annual gross income. This figure hasn’t quite reached financial crisis levels (108%), but it’s down from the all-time high of 116% in 2022.
Previewing 2024
Now that mortgage rates are trending downward, potential buyers aren’t as discouraged as they previously have been. And investors are now more optimistic that the Bank of England won’t raise rates again anytime soon. This is important to note because this shift in perspective has brought down the longer-term interest rates which help determine fixed mortgage rate pricing.
Despite some good news, it’s unlikely that we’ll experience a full turn around in 2024. Cost-of-living pressures are easing and inflation is coming down, but consumer confidence is still weak and surveyors continue to report low levels of new buyer enquiries. To top this all off, even though the Bank Rate is predicted to move down, there are still risks that it will turn upward.
However, the combination of solid income growth, modestly lower house prices and mortgage rates will all work together to make house prices more affordable despite market activity remaining subdued. If the economy doesn’t improve, but mortgage rates begin to gradually moderate, experts predict that house prices in the new year will either remain broadly flat or experience a small decline.
Stay in the know
If you’re planning to buy or sell property, check back monthly for our regular update on the nation’s property prices and contact one of our advisers for personalised advice.
Figures quoted from Nationwide House Price index – December 2023.
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