UK house prices have been forecasted to decline in the year ahead. However, the average UK house price for December increased for the third consecutive month according to Halifax. The increase has not deterred their expectation of a fall in 2024 of up to 4%. Buyers are not returning to the market as the data would suggest, but rather there are fewer properties in which to purchase. Supply has dipped further, and it has pushed the typical home purchase to £287,105. 

Halifax data for December revealed the average house price increased in December by 1.1%, following behind the November increase of 0.6%, and 1.2% in October. The average house price in December was approximately £3,000 more than in November.

The December report is the first in eight months that revealed annual growth with a 1.7% increase in December. 

The Bank of England also reported increased demand for property in their November report released last week. The number of mortgage approvals in November increased to 50,100 from 47,900 reported in October. 

It should be noted that many lenders have entered a competitive mode in lending. Despite the Bank of England keeping the standard base interest rate steady in the final three meetings of 2023, lenders have chosen to respond with lower rates. Some mortgage and remortgage offers have been less than the base rate set by the Bank of 5.25%.

More attractive lending rates will help bring or keep home buyers in the housing market, but rising house prices will not. There is a need for demand to decline, or supply to rise to get house prices at a level which when matched with current interest rate offers will create a balance to bring more hopeful home buyers onto the property ladder. 

This could also occur should one decline farther downward such as what happened during the pandemic when interest rates plummeted. Despite record breaking house prices, the historically low borrowing rates offered from lenders kept buyers in the housing market. 

While interest rates are not expected to decline to levels seen with the pandemic, they might lower, or house prices will decline, which could be considered a correction from the pandemic low interest rate house buying boom.

There is a downside to house prices declining. While it assists buyers onto the property market, declining house prices can result in lower property values for homeowners. 

Homeowners might believe the only time it would matter as to the value of their property is when they consider selling it. However, the value level matters when homeowners choose to remortgage after their current mortgage term ends. The ratio of the property value to the loan request is important. The loan to value or LTV will determine what deals a lender will offer a homeowner. 

In the case of a property value declining below the level of debt on the property, the homeowner will have declined into negative equity. Lenders will not qualify a homeowner for a remortgage if they are in negative equity. Without the ability to remortgage at the end of a mortgage term, the lender will move the homeowner to their standard variable rate or SVR which could be double or more the offers available with a remortgage. 

The housing market matters to the economy, it matters to sellers and buyers, and even long after a homeowner has purchased their property, the housing market will matter to them as well due to the impact on property values.

Currently, the expectation is for the housing market to experience decline in the coming year. House prices could decline, property values might as well, but not necessarily in all regions. Of course, the market might prove to be more resilient. If interest rates lower, if supply grows, then the decline could be lessened.

The housing market matters, and a forecast of a decline should concern all. The outlook, however, is basically unknown, for the housing market has proven to be resilient in even the most unexpected circumstances, such as the global pandemic. There is no need to panic, but rather stay informed and take advantage of the opportunities that develop or before opportunities disappear.