Brighter days could lie ahead for the housing market following a rocky period caused by inflated mortgage costs.
ADVERTISEMENTEstate agents expect home sales to recover in the coming year after a plummet in demand seen in 2023, according to data released on Thursday by the Royal Institution of Chartered Surveyors (Rics).
Rics' annual sales expectations jumped by 10% between November and December, coming in at 34%.
Meanwhile, Rics' measure of new buyer enquiries was -3% in December, a strong improvement from November's figure of -13%.
The indicator for agreed home sales also increased to -6% last month, the highest level seen since March 2022.
These figures mean that newly-agreed sales and new buyer enquiries are still decreasing, but that the rate of decline is slowing.
Rics senior economist Tarrant Parsons said: "Supported by an easing in mortgage interest rates of late, buyer demand has now stabilised, and this is expected to translate into a slight recovery in residential sales volumes over the coming months."
Thursday's report also noted that it now takes an average of 18 weeks to complete the sale of a home, compared to 20 weeks in September 2023.
November's house price plummet
On Wednesday, the UK's Office for National Statistics (ONS) released housing figures for November, with the data showing the sharpest decline in house prices seen in over a decade.
The average cost of a home contracted 2.1% in the year to November 2023, compared with a 1.3% annual drop recorded in October.
Whilst the average UK house cost £291,000 (€339,000) in November 2022, it cost £6,000 less (£285,000) in November just gone.
To look at regional differences, the North East was the English region that saw the smallest decrease in average house prices in the 12 months to November (down 0.4%), while London saw the largest fall (down 6.0%).
That said, the capital still remains the most expensive place to live in the UK, with an average house price of £505,000 in November 2023.
Why are homes becoming cheaper?
The drop in house prices was provoked by a jump in interest rates that raised borrowing costs and dampened buyer demand.
Before the Bank of England's decision to hold rates at 5.25% in September, the UK witnessed 14 consecutive interest rate hikes, meaning that those on variable mortgage plans saw their payments skyrocket.
Going into 2024, the mortgage scene is shifting, as became clear when a number of lenders cut their fixed-rate mortgage deals at the start of January.
According to data released on Wednesday by real estate company Rightmove, the current average mortgage rate for a five-year fixed-rate mortgage is 4.79%, down from 4.94% the week before.
Looking at two-year fixed rates, Rightmove reported the average deal at 5.10%, down from 5.28% in the previous week.
Many analysts are hopeful for further improvement in the UK's housing market as the stabilisation of the base interest rate increases buyer confidence.
ADVERTISEMENTThat said, on the topic of falling mortgage rates, it's also important to note that many homeowners are actually seeing an increase in their mortgage rates this year.
This is because their fixed rate deals, agreed upon before interest rate hikes, are set to expire.
On top of this, we should remember that the Rics data was collected before the publication of December's inflation figures for the UK, which unexpectedly came in at 4%.
This inflation setback could push back the timeline for interest rate cuts, dent market confidence, and keep mortgage rates higher for longer.
