House prices forecast to drop further in 2024 – when is the time to buy?

House prices didn't crash in 2023, despite what was expected by some commentators. However, they may drop this year, which could make many buyers wonder whether the time is right to get onto or move up the property ladder.

The latest Nationwide House Price Index shows average values dropped 1.8% during 2023, but Halifax suggests they were up 1.7%.

Meanwhile, the latest Rightmove  index of asking prices showed a "promising new year start" as the average price of new property listings rose 1.3% between December and January, the biggest December to January increase in prices since 2020.

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That is why it is worth checking all house price reports, said National World, as the "source of their data" can differ. 

What happened in the property market in 2023?

House prices fell for much of last year, as high interest rates and mortgage costs dampened demand.

According to Zoopla, sellers were offering the "biggest discounts in five years" on property listings, putting buyers in a strong negotiating position.

Property sales also experienced a "marked drop-off" in 2023, Which? reported. HMRC figures show a "hefty drop" in transactions in November, with an estimated total of 87,640 – down by 22% year-on-year and 2% lower than in October.

The number of sales being agreed by estate agents is 10% lower "than at this time in the more normal market of 2019", said Rightmove.

Will the housing market recover in 2024?

Halifax has predicted a drop in house prices of between 2% and 4% while Nationwide expects average values to be flat or to drop by 2%.

Rightmove is still predicting a further 1% fall in 2024 and warned that higher mortgage and interest rates are still "stretching the affordability" of buyers.

But some analysts, such as estate agent Knight Frank, have revised their forecasts as inflation has fallen "faster than expected" and mortgage lenders have dropped their rates "fairly significantly".

Knight Frank is now expecting UK mainstream prices to rise by 3% this year, which compares to a decline of 4% predicted in October. 

However, not everyone shares the same sense of optimism.

The first weeks of January have shown "improving conditions", said Zoopla, as mortgage rates drop and buyer demand is up around 10% compared with the pre-pandemic years. However, house prices still need to "adjust to higher mortgage rates", the property website explained, so it's "unlikely we'll see prices rise in 2024 at a national level".

Getting the price right at the first listing "maximises the initial impact", said Yahoo! Finance, and gives sellers a "much greater likelihood of a successful sale".

There are "varying forecasts", said Which?, on the extent of the expected overall drop in house prices. 

A forecast from the Office for Budget Responsibility predicts that prices will have dropped by the end of 2024 to a level that is 7.6% below the peak recorded in late 2022, but will then begin climbing again.

Even if prices do drop significantly, affordability is likely to continue to be an issue for many would-be buyers.

Should would-be buyers wait or act now?

Buying during uncertain times can "feel more risky", said Tembo Money, but buyers could benefit from less competition as others are "resistant to take the plunge".  

It is "tricky" to know when it’s best to act, said The Times Money Mentor, but all the same, first-time buyers in particular may be waiting for  house prices to "fall further to make it more affordable to buy". 

And while they might "save money on the purchase price" by acting now, high mortgage costs could "cancel out" any savings.

But on the other hand, the site continued, while rental costs are soaring, mortgage costs have "dipped slightly" in recent months. If this downward trend continues, prospective buyers may face the "ideal combination of lower house prices and mortgage rates" towards the end of 2024.

Of course, there are no guarantees about the direction of property prices and mortgage rates, and whether to buy or hold off will depend on each buyer's personal circumstances.