Why now is the right time to buy a house

Property prices have bottomed out and there is more stability across the mortgage market than a year ago, reports Tom Knowles

The last 18 months have been a turbulent time in the property housing market, buffeted by rising mortgage rates, a drop in transactions and a lack of homes coming up for sale.

Now, however, a sense of optimism is returning, due to cheaper mortgage rates, a more stable-looking economy and greater optimism from the public about their finances.

Property analysts, estate agents and economists believe that this is a buyer’s market, with activity, sales and prices all recovering faster than expected since the start of 2024.

Some experts have suggested that now may be the time to buy, as house price falls have bottomed out – and values may soon rise again.

House prices fell by 1.8pc over 2023, according to lender Nationwide, and dropped by a total of 6pc between the peak of the market in August 2022 and December 2023. This was a much smaller drop than many analysts had been expecting, with some having forecast falls of as much as 30pc from peak to trough.

More recent data from Nationwide for the first three months of 2024 show that the average UK house price has increased by 1.4pc. There are signs that the house price falls fuelled by soaring interest rates have stalled.

Lucian Cook, of Savills, says: “There has been an earlier recovery in the market than people were expecting. That’s been underpinned by inflation falling back and we’ve had more stability in the mortgage markets, with the cost of mortgage debt certainly easing from the back end of last year.”

Property analysts now believe the final three months of 2023 marked the bottom of the market, with prices likely to remain flat or increase very slightly by the end of the year.

Anthony Codling, an analyst at RBC Capital Markets, an investment bank, is more optimistic than most, forecasting that house prices will rise by 5pc for the UK this year. He said: “Mortgage approvals are increasing, wages are rising, and in our view mortgage rates are more likely to fall than rise in the coming months. Looking forward, we believe the housing market’s glass to be half full rather than half empty.”

One region that is expected to see greater house price growth is London.

The capital has experienced the weakest price growth since 2016 of any region in the UK, increasing by just 13pc. However, in the first three months of this year, a home in London was more likely to sell above its asking price than anywhere else in England and Wales for the first time since 2016, according to research by the estate agent Hamptons.

Now, it is a “buyer’s market”, according to Nehal Virani, of estate agency Property Hub.

Estate agents in the city are growing more confident about the year ahead, according to the Royal Institution of Chartered Surveyors.

Jeremy Leaf, a north London estate agent, says: “The recent increase in listings has meant some buyers are spoilt for choice. Activity in our offices is certainly much stronger than the last few months of 2023 with demand for family houses stronger than for flats.”

Aneisha Beveridge, of Hamptons, says: “We’re coming towards the end of an 18-year house price cycle, which is normally the point where you start to see London picking up faster than anywhere else. There’s quite a few metrics that point towards London being at the forefront of this kind of recovery this year.” However, Richard Donnell, of property portal Zoopla, warns house price growth will be minimal for the UK as a whole. “I think we’re going to have a prolonged period of very low house price inflation. There are still big affordability problems in the south of England,” he said. “But there’s more supply, alongside more willing buyers and sellers who are not miles apart on price, so deals are happening.”

A mortgage price war at the start of 2024 led to the prices of fixed rate deals being slashed. But since then, rates have ticked up: two-year fixed deals were 5.8pc at the start of April, up from 5.76pc at the start of March, while the average five-year fixed rate increased from 5.34pc to 5.38pc within the same period, according to Moneyfacts, a financial services provider.

While rates are predicted to fall further, the pace of reductions has tailed off as money markets now only expect one Bank rate cut this year which could come as late as November. However, acceptance from buyers that current interest rates are the new normal means that sentiment has improved.

Estate agents have reported a rise in activity and optimism in the housing market among their customers, as the economy looks to be on a more stable footing than last year. The latest report from the Royal Institution of Chartered Surveyors reported the highest demand from buyers since February 2022, while the level of those looking to sell their property was also rising.

Average stock levels on estate agents’ books now sit at 42 properties, the highest since February 2021.

Stan Shaw, of the estate agency Mervyn Smith, based in Surrey, says now is a good time for those thinking of putting their home on the market.

“We’ve started getting higher prices for properties than we were at the end of last year,” Shaw says. “It’s starting to feel like the housing market is improv

Increase in price of UK home in first three months of 2024, according to Nationwide

Zoopla forecasts this percentage more sales in 2024 than last year, at 1.1m ing ... Buyers have started to feel more positive looking forward.”

Zoopla has forecast that the market is on track for 10pc more sales in 2024 than last year, set to total 1.1m. Shaw adds: “If you want to move in the summer you need to be getting a sale or purchase wrapped up in the coming weeks. This year the increased activity will probably coincide with interest rates dropping a bit, so it could be a busy period.”

The rise in activity in the housing market is being shown in official figures, with the number of property sales increasing by 1pc to 82,940 between January and February, the second month of rises, according to HMRC. Mortgage approvals also rose above 60,000 in February for the first time since September 2022.

At the same time, people have been enjoying an increase in wages, with average incomes outpacing the rate of house price growth and inflation. Pay, excluding bonuses, rose by 1.8pc in real terms in the three months to January compared to last year, according to the Office for National Statistics. A monthly survey by GFK on consumer confidence shows people in March were the most optimistic about their personal finances for the coming year than any time since December 2021.

“You can never underestimate stability and how that impacts confidence in the market,” says Beveridge. “This time last year rates were just rising so quickly, lenders were pulling deals, and inflation was not under control, so it was incredibly hard for anyone to commit to something when the sums were changing all the time. Now we’ve had a few months of relative economic stability, so it’s allowed people to plan a bit more and commit.”