UK Housing Market Predictions 2023 & 2024

We take a look at UK housing market predictions for 2023 and 2024, and a closer look at patterns in the UK rental market.

In 2021, strong demand and a lack of supply resulted in the fastest-moving ​​housing market in the UK in the last five years. In the wake of the Pandemic and Covid-19-related lockdowns, there were fewer properties to meet demand. And house prices in most areas of the country increased more rapidly. 

2022 was a bumpy year for the UK property market. In the first half of the year, the UK housing market remained buoyant. But in the second half, house prices began to flatten and fall. 

Investors and property owners will be wondering what 2023 and 2024 have in store for the UK property market. With such rapid house price growth in recent years and economic headwinds, a slowdown in the housing market was inevitable. But will the market crash like some commentators have predicted, and when will the market pick up again?

2023: A Transition Year for the Housing Market 

After record-breaking property prices in 2021 and a bumpy 2022 for the UK property market, 2023 is a year of transition. That is, as buyers and sellers adapt to a new era of higher interest rates after record-low borrowing costs. 

In a bid to control inflation, the UK base rate has risen to 4% – the highest in 14 years. Which has resulted in a steep rise in mortgage costs, alongside high inflation and a rising cost of living. All of these factors have contributed to a slowdown in the housing market.

House Prices Dropping, But Housing Market Crash Predictions Unlikely to Come True 

House prices soared by more than a quarter during the Pandemic. Boosted by low interest rates, tax incentives and demand for more living space. UK Housing market predictions state that due to the economic environment, property prices are expected to remain sluggish in 2023. With less transactional activity as buyers and sellers haggle over price. 

While House prices in 2023 are falling, many are wondering, ‘will there be a housing crash?’. JLL forecasts that house prices in the UK are unlikely to crash. But will fall by 6% in 2023, around £17,500 from the average UK house price of around £290,000. 

Regional UK Property Market Trends 

Not all cities and regions will fare the same in 2023. JLL predicts that prices in Greater London will fall by 4% and Yorkshire and the Humber around 8%. Many of the UK’s cities will fare better, and popular locations like Manchester, Birmingham, Bristol and Edinburgh could see smaller house price drops. 

Despite clear challenges, the UK housing market remains in a strong position in 2023. Unemployment is still at near record lows and fewer households have high loan-to-value loans secured against their properties.

 Overseas Buyers Snap up Property

In the UK, cost of living pressures are beginning to ripple through the market. With a weaker pound, wealthy overseas buyers are taking the opportunity to secure homes in central London. The number of reservations from international buyers was up 33% in 2022 compared with the previous year. Most of these overseas buyers are from Mainland China, Hong Kong and Malaysia.

The 2023 Rental Market

In 2022, housing trends saw UK rents surge due to a backdrop of economic uncertainty and record rising property prices. Which meant more people being priced out of the market and renting for longer. Between January and November 2022, rents climbed 10% from £1,064 to an average price of £1,175. 

As of February 2023, the average price of rent has held steady, matching the November 2022 peak. Driven by a demand-supply imbalance, UK rents are expected to rise 4% in 2023. Housing market predictions state that Manchester is predicted to have the strongest rental growth in the UK in 2023. Additionally, rents could increase by 6%. Birmingham and Bristol could see rental growth of 5% and 4% respectively, followed by 2.5% in Leeds and Liverpool.

The London Rental Market

In London, a worsening supply of rental properties saw annual growth in rent of 12.4% in February 2023, reaching an average rent of £1,975 per month. Returns are expected to climb 6% in the heart of the city and 4.5% in the outer areas of London. 

Demand for Energy Efficient Homes

With a rising cost of living, renters are being drawn to energy efficient, new-build city centre rental homes in a bid to keep energy costs low. There is also a rise in tenants looking to be close to public transport for quick commutes to work. The return of students to the city centre is also likely to be a strong source of rental demand in 2023. 

2023 will continue to see a shortage of homes, adding pressure to the rental market. There is a supply deficit with 23% fewer rental properties available in 2022, which is unlikely to change in the near to medium term.

An Imbalance in Supply and Demand Continues to Underpin Rents

The lack of homes to rent is an ongoing issue across the UK. With the Help-to-Buy scheme at an end, many prospective buyers will likely remain in the rental market in greater numbers, adding to an already constrained supply. 

Continued pressure on the cost of living, alongside higher borrowing costs, suggests demand for rental properties will remain strong in 2023. For tenants, affordability will continue to be an issue. According to Homelet, renters in the UK are spending 31.3% of their income on rent, rising to 36.1% in London.

As fewer households move to purchase homes, demand for rental properties is set to increase further. It is expected that rental growth will remain at the front end of the 2023 – 2027 period, before falling back in line with historic norms of 2-3% as inflation is brought back under control.

For landlords, rising rent prices could see yields increase for many buy-to-let property owners. However, the cost of debt may remain a challenge for many landlords.

Are House Prices Expected to Rise in 2023?

Predictions for the UK housing market need to take into account how higher interest rates and cost of living pressures have slowly filtered through to the housing market. In 2023, house prices are expected to fall 6%. However, regional property market trends vary and in many UK cities house prices remain buoyant.

Will the Housing Market Crash in 2023 or 2024?

With house prices beginning to slow and fall in the second half of 2022, combined with an increasingly challenging economic environment, some housing market predictions state that the UK market would crash in 2023. 

However, a resilient job market and easing fears about a recession are helping to soften the blow of higher interest rates. So far, these factors have kept annual house price falls to a minimum, limiting doom and gloom when it comes to the UK housing market outlook. While house prices are expected to fall in 2023, they are not expected to crash as predicted by some commentators. 

What will happen to the Property Market in 2024?

When it comes to the housing market outlook in 2024, some experts predict that the UK property market will continue to decline. As interest rates remain high, we are unlikely to see a massive change in direction and until interest rates start dropping the property market is unlikely to pick up. Housing market crash predictions seem to be wrong so far. 

Experts predict that property prices could start to have a modest recovery towards the end of 2024 and pick up again in early 2025. When it comes to UK housing market trends, no one can predict the future with complete accuracy, but based on current patterns, 2023 and 2024 will see a dip in property prices that is expected to bounce back as inflation and interest rates drop in 2025. 

Conclusion

With higher interest rates and a rising cost of living, house prices and property sales are falling and the market is set to remain sluggish in 2023. However, the UK looks set to avoid a housing market crash thanks to a robust employment market. For some landlords, there are options to buy properties at a good deal, and a growing rental market means there are plenty of opportunities for buy-to-let investors. The rental market is expected to stay on a growth trajectory between 2023-2025, driven by a demand-supply imbalance. For more housing market UK predictions, get in touch with our experts.