2024 forecast: prices to drop by 1% as competition increases among sellers
Rightmove predicts that average new seller asking prices will be 1% lower nationally by the end of 2024, as the market continues its transition to more normal levels of activity following the frenetic post-pandemic period.
Motivated sellers are likely to have to price more competitively to secure a buyer in 2024, and agents will work even harder to build chains, especially at the bottom end where first-time buyer affordability will remain stretched.
Mortgage rates will settle but remain elevated, tempering some buyers’ budgets, especially in the lower and middle market sectors.
Rightmove’s forecast is based on its whole of market data and house price predictive model using millions of supply, demand and pricing data, along with insights from estate agents and a panel of Rightmove experts.
A year ago, Rightmove predicted average new seller asking prices would drop by 2% in 2023, and they are currently 1.3% lower year-on-year.
Sellers to price more competitively
The average time for a seller to find a buyer has jumped from 45 days this time last year to 66 days now, with those sellers who have been competitive on price able to find a buyer more quickly. Some monthly price falls have been greater than the usual seasonal trends this year. We expect that those sellers who have a more pressing need to attract a buyer will continue to price below their competition into 2024, and to be joined by sellers who have taken longer to adjust to the softer market conditions and belatedly get up to speed.
The level of price reductions has increased during 2023, with 39% of properties now seeing a price reduction during marketing compared to 29% last year, and 34% in 2019. New sellers will need to compete with their cut-price neighbours, and work with their agent to start their marketing with a competitive price, rather than starting too high and needing to reduce later. Rightmove research shows that pricing right at the outset maximises the initial impact among local buyers and gives new sellers a much greater likelihood of a successful sale.
Mortgage rates to settle, but movers will have to wait for more significant cuts
Average mortgage rates have now fallen steadily since July, providing movers with much more stability and certainty over the type and cost of mortgage offer they are likely to receive compared with the more volatile mortgage market of this time last year. The average two year fixed rate is now 5.52% and average five year rate is 5.11%.
However, while the outlook for mortgage rates has improved and there are signs that the Bank of England Base Rate has peaked, affordability remains stretched for many buyers. With the bank signalling that any Base Rate cuts are not imminent and are likely to remain elevated during 2024, some buyers’ spending power will remain limited.
Return of the pre-mini-Budget buyer
The highly uncertain nature of the post mini-Budget period, with mortgage products withdrawn, rates changing almost daily and rapidly rising, means some buyers held back from their plans – either to reassess what they could afford, or to avoid having to deal with the volatile mortgage market.
Though rates are still high compared to recent historically low levels, the mortgage market is much calmer. Those who had pulled back during the last year may decide the start of this year is the right time to return, now that they can better plan for what they can afford.
Agents to seek first-time buyers to build chains
Buyer demand in the typical first-time buyer sector (two-bedroom and fewer properties) is hardest hit compared to last year. Not only are first-time buyers having to assess their budget and the impact of higher mortgage rates, they also have their deposit to save up for amongst a wider affordability squeeze.
Agents report that there will likely need to be an even greater focus on securing first-time buyers for the bottom end of chains in 2024 to help build longer chains, create more sales, and keep transactions moving.
Significantly more choice for buyers, but no glut of homes for sale
Buyers are much more likely to see a choice of homes for sale in their area that suits their needs compared to the stock-starved pandemic years. Buyers coming to market in 2024 are in a strong position to negotiate on price and take more time to choose the home that’s right for them.
However, the number of available homes for sale has only just increased to pre-pandemic levels and there are no signs of a wave of new listings which would create a glut of homes for sale. With more choice and fewer buyers on the ground, it will be those sellers who are willing and able to price temptingly who will attract buyer’s attention.
Rightmove’s property expert Tim Bannister said: “This year has been better than many predicted, with no significant signs of forced sellers, lower than expected price falls, and good buyer demand for the right-priced quality properties. However, it has been a challenging change in mindset for some sellers to transition from the frenzied market of the previous few years. The level of sales being agreed is 10% lower than at this time in the more normal market of 2019, so sellers will need to price even more competitively next year to make sure that they secure a buyer.
“We predict a modest average fall of 1% in new seller asking prices next year. This will be felt more keenly in some areas of Great Britain than others. The housing market is made up of thousands of local markets, each with their own unique dynamic of supply and demand. In areas with more discretionary sellers and fewer homes for sale, we may see new seller asking prices remain flat, or even very slightly increase compared to this year.
“In areas where sellers are struggling to attract affordability-stretched buyers or needing to sell quickly due to a change of circumstance, new job opportunity, or strong desire for a lifestyle change, we are likely to see even more competitive pricing.
“An average drop of 1% in prices reflects our prediction that it’s likely to be another muted, and in parts challenging, year for some buyers and sellers in 2024. However, the better than anticipated activity this year has shown that many buyers are still getting on with satisfying their housing needs, and there is considerable opportunity for sellers and their agents to attract these buyers with the right pricing and marketing strategy. This underlying level of good demand at the right price makes it unlikely that we will see a more significant drop in prices next year.”
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Notes to editor
For further information please contact Jamie McLean on 07527 995286 or email firstname.lastname@example.org
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