PASSING PEAK FIRST-TIME BUYER
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Quite a few FTBs have been escaping soaring private sector rents. But many who hoped to leap into homeownership have been priced out by the surge in the cost of borrowing. Will they have better luck in 2024? Not necessarily. Lower mortgage rates will increase the already tough competition for smaller properties. And rates (or prices) are unlikely to come down enough to unlock many more new purchases. As a result, 2023 may prove to have been the peak for FTB purchases.
HELP TO BUY 2?
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In the short term, the slowdown in supply will underpin prices, with developers ensuring that homes are not completed any faster than they can be sold. But housebuilding is set to be a key battleground in the general election, which suggests that both of the two main parties could unveil a reincarnation of the Help to Buy scheme under a new name.
BOOMER POWER
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Since nearly all have only a tiny mortgage or own outright, they can use this equity to downsize. But in 2024, Baby Boomers will not only be using their equity to snap up a smaller home. Many will be opening up a branch of the Bank of Mum and Dad (BOMAD) to help their children climb onto the ladder or move to a larger property. The Boomers will also be lending a hand to their grandchildren.
SMALL IS BEAUTIFUL AGAIN
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This trend seems likely to continue in 2024. Price falls seem set to be restricted to larger properties - which soared during the Covid race for space. It seems that households who would have liked to move to something bigger are either staying put and renovating, or opting for less expensive neighbourhoods.
RENTS TO RISE FASTER THAN HOUSE PRICES
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Mortgage rates seem to have peaked and should move downwards. But we still expect rates to remain higher than has been the norm - which will weigh down on price growth over the medium term.
By contrast, rents are likely to continue rising until landlord’s profit margins are at least partially restored, or their costs begin to fall. We forecast that rents will rise more than four times faster than house prices over the next four years – an unprecedented event in recent market history.
POLITICS AND PROPERTY
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But we are not expecting a big slowdown brought about by uncertainty this time around. At present, the odds may suggest a new occupant at 10 Downing Street. But, ideologically, the current leaders of the two main parties are not a million miles apart. As more detail of the contents of the parties’ manifestos begins to emerge, this should dispel any uncertainty