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Average House Prices Predicted to Dip 3% in 2024

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    Housing Market Performed Better Than Expected Last Year, But JLL Still Expect Price Decline in 2024

    If you pay attention to UK housing market news, you may have noticed that the overall mood among forecasters and experts is markedly better than last year. Many thought the property market would suffer significantly after an extended period of high inflation and rising interest rates. However, despite slowing activity and high mortgage rates, the property market performed better than anticipated.

    Now, many forecasters feel this year will be much better than the last, following a recent decline in interest rates and mortgage rates easing in recent times.

    Investment management firm JLL recently looked at some tangible factors that will affect the property market over the next year.

    Let’s look at some of those factors in more detail.

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      Will Property Prices Rise or Fall in 2024?

      JLL points out that the Nationwide, ONS and Halifax House Price Indices show little change in UK property prices over the last year. ONS showed the most significant decline in property prices at -2.1%, while Halifax showed an increase in prices at +1.7%. This sharply contrasted with the consensus at the start of 2023, when forecasters expected prices to fall by around 6%.

      However, an RICS survey saw respondents report a consistent price decline every month from November 2022. While Q3 2023 was the most negative quarter of the year, the December figures were the best since November 2022.

      This implies that the market might be turning, but it also suggests that the current figures may only partially capture the slowdown in the market during the second half of 2023. The Office for National Statistics (ONS) data includes deals agreed upon months before, and the time between making an offer and completing a transaction often exceeds four months.

      As a result, the prices achieved until spring will predominantly reflect deals made in 2023 when costs of buy-to-let were higher and sentiment was weaker. This means that even if the market appears more active and we observe an increase in activity and prices, the figures may take some time to align.

      JLL predicts a 3% decline in UK house prices in 2024. Factors such as an early election, incentives in the spring budget to stimulate activity, or an earlier series of rate cuts by the Bank of England could make that outlook seem more negative.

      However, until more information is available, JLL assumes that base rates will have decreased by the summer, leading to increased activity. If the UK property market follows this trajectory, it is more likely that we will see price rises in the second half of the year, but it might not be until 2025 that we observe these changes reflected in the indices.

      For that reason, buy-to-let investors may find good-value properties available for cheaper than they usually would be over the next 12 months.

      Further Reading: If you are considering investing in off-plan property, check out our article on investment property advice or review some of the Cardiff investment property opportunities.

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      Will Activity Improve in the UK Property Market?

      According to data from Rightmove, there was a 20% increase in agreed-upon sales during the first week of 2024. Average asking prices have also risen by +1.3% in the last month. While such trends are expected at this time of year, the growth rate is double the 20-year January average (+0.6%) and marks the highest since January 2020, which coincided with the brief surge in activity known as the Boris bounce.

      Some sceptics might suggest that the distribution of school holidays resulted in more people being at home and engaging in house hunting this year compared to last. However, the latest RICS Survey results support the notion that buyers are returning, with demand improving for the fourth consecutive month.

      Read More: Expand your buy-to-let investment knowledge with our guides on buying property through a limited company and how to make money from property.

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        What Can We Expect in the 2024 Rental Market?

        Homelet reported that average rents increased by 8.0% in the year leading up to December 2023, marking the smallest annual rise since September 2021. For the second consecutive month in December, rents experienced a 0.9% decline. It’s worth noting that a seasonal cooling in the rental market during this period is not uncommon, so it’s advisable not to overinterpret these figures.

        However, the current stock levels are higher than what has been observed recently, and data from the RICS indicates that the gap between the stock entering the market and tenant demand is narrowing.

        According to the JLL forecast, rents are anticipated to grow by 5.0% in 2024. While this is a decrease from the levels seen in 2023, it remains higher than historical averages, meaning if you plan on investing in buy-to-let, you may see significant gross yields for their investments in 2024.

        For more insights on the buy-to-let market, check out our guides to different areas throughout the UK, including:

        Average House Prices Predicted to Dip 3% in 2024

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        Dale Barham

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        Dale is a property news and onsite content writer at RWinvest.