Zoopla Unveils June 2024 House Price Index.
Key takeaways
The average house price in the UK is ￡264,900 as of May 2024.
Property prices are now at 0% inflation compared to a year ago. However, the average UK house price is set to rise by 1.5% by the end of the year.
Key figures
The below graph shows how the UK's average house price has changed in the last 10 years.
Home buyers and sellers shrug off election
Zoopla reported the recent increase in sales market momentum has continued through June, though at a slightly slower pace than in the past few months. New sales agreed are still 8% higher than a year ago, and other key market activity indicators are also up year-on-year.
However, as we approach the quieter summer period there are signs of a slowdown. Buyers and sellers who started the home-buying process when the election was called are likely delaying decisions until after the election, contributing to this slowdown.
Sales agreed have decreased slightly month-on-month across all regions, with the North East down 6% and the West Midlands down 5%. The overall stock of homes for sale is still growing in all regions though at a slower rate than in recent months, with nearly 20% more homes for sale than a year ago.
House price inflation is static, and is still negative in the South
Improving sales volumes in the first half of 2024 have led to a stabilisation in average house prices, as reflected in Zoopla's house price index. Since January, all regions and countries of the UK have seen month-on-month increases in house prices.
The annual rate of UK house price inflation is now at 0% as of May 2024, recovering from a low of -1.3% in November 2023 and compared to +1.6% a year ago. While house prices in southern England continue to decline annually, the rate of decline is slowing. Meanwhile, prices in the rest of the UK are increasing, with Northern Ireland seeing a rise of up to 3.3%.
We do not anticipate a significant acceleration in price rises in the coming months, but UK house prices are on track to be 1.5% higher by the end of 2024.
75% of this year's sales are completed or in progress
With the 4-5 month gap between a sale being agreed and completed, Zoopla have been able to establish a clear view into the 2024 sales pipeline. Our data indicates that the market is on track 1.1million sales this year.
领英推荐
Three-quarters of these expected sales have either been compared or are currently in progress. There are still over 250,000 sales yet to be agreed, which we expect to complete by the end of 2024.
The projected 1.1million sales represent a 10% increase from 2023, although still below to 20-year average. This rise in sales, despite higher borrowing costs, reflect a more realistic perspective from sellers and renewed, cautious confidence among buyers.
The sales market has proved resilient
Despite rising mortgage rates, the housing market has shown resilience over the past year. Rates have climbed from below 2% in late 2021 to 4.7% today, even surpassing 5% in October 2022 and summer 2023.
Higher borrowing costs have reduced new buyers' purchasing power, leading to a 23% drop in sales in 2023, rather than significant price drops.
House prices have remained stable due to low unemployment and few forced sellers. Although prices are still high compared to affordability measures, it is expected that house price inflation will slow down and grow more slowly than household incomes in the next 1-2 years.
Housing remains overvalued but the trend is improving
One way affordability has been tracked by the team at Zoopla is by comparing actual house price to an "affordable house price", which is based on household incomes and mortgage rates. The recent surge in mortgage rates resulted in house prices being overvalued at 13% at the end of 2023. This is less severe than during the pre-2007 financial crisis and the late 1980s housing bubble, both of which saw double-digit price drops following periods of overvaluation. Recent price falls have been smaller due to more modest overvaluation and reduced sales volumes.
Faster wage growth over the past three years has increased household disposable incomes, helping to counteract the impact of higher mortgage rates. Additionally, buyers have been opting for longer-term mortgages to gain an extra 5%+ in buying power.
Zoopla have estimated that house prices were 8% overvalued at the end of March 2024, but this overvaluation is expected to disappear by year-end. This projection assumes a 1.5% rise in house prices and mortgage rates holding steady ay 4.5%.
Interest rates hold the key
Looking ahead, the short-term outlook for the housing market will largely hinge on mortgage rates, which are influenced by interest rates. Any reductions in the base rate over the summer and into the autumn could boost market sentiment and sales activity, through the impact on fixed-rate mortgages may be less pronounced.
City forecasts suggest mortgage rates will stay in the 4-4.5% range, which should support sales volumes and result in modest house price growth. House prices in the south of England are expected to continue lagging behind the UK average as they adjust to align with incomes. Income growth will be crucial in sustaining sales and demand into 2025.
House Price Index - country, region an city summary
You can download the full report from Zoopla HERE.