Is now a good time to buy a house?

Last updated: May 2024 | 3 min read

Buying a house in the UK in 2024 seems like a good idea. House prices have been falling in the current year. Projections suggest this trend may persist, with experts foreseeing declines of up to 5% over the next 12 months. But, some rare examples can be found where a 3–4% rise is predicted by the last quarter of 2024. Read on to find more detail before going house hunting. 

Is now a good time to buy a house in the UK? The short answer is 'yes'. But it also depends on your unique circumstances.

The UK housing market saw significant growth in the past decade, with average property prices surging over 50% since 2014 according to the Land Registry House Price Index.

Industry specialists propose that the current climate presents an opportune moment to invest in UK real estate, offering prospects for substantial capital growth and rental returns.

Our article takes you through the dynamics of house buying a must-read for those thinking about their first home or considering a second property.

Insights on current house prices

"Average UK house prices decreased by 1.4% in the 12 months to December 2023 (provisional estimate), up from a decrease of 2.3% (revised estimate) in the 12 months to November 2023.

The average UK house price was £285,000 in December 2023, which was £4,000 lower than 12 months previous."~ The Office for National Statistics UK.

Why do prices fluctuate?

House prices, as with any commodity, shift in response to supply and demand dynamics. In the property market, several elements influence these dynamics:

  1. Economic performance: when the economy thrives, people feel more financially secure. This often leads to an increase in demand for houses. Conversely, during economic downturns, caution tends to prevail, reducing demand.

  2. Interest rates: a direct relationship exists between interest rates and house prices. Lower interest rates often mean lower mortgage repayments, making borrowing more attractive. Conversely, rising rates can deter potential buyers.

  3. Government policies: initiatives such as the stamp duty holiday have previously boosted demand, pushing house prices up. Regulatory changes can also impact the ease with which people can borrow money, affecting demand.

  4. Rental market health: if the rental market is buoyant, with high yields for landlords, more investors might buy to let properties, increasing demand for homes.

  5. Speculation: if buyers believe house prices will rise in the near future, they're more likely to purchase now rather than later, and vice versa.

Recent trends in house prices

House prices have seen varied trends over the past few years. Here's a snapshot of the current situation:

  1. Average house prices: land registry data suggests that the average house price saw steady growth over the past years when there was an easing of pandemic restrictions. But now it is on the downhill.

  2. Regional variances: regions like Northern Ireland have seen more fluctuations, while others have remained more stable.

  3. Rising rates and economic factors: inflation soared in the years leading up to 2022, but over the last couple of years, it has been gradually decreasing. This indicates a potential interest rate decline, making mortgage options more viable for buyers.

  4. Rent vs. buy: with rental properties in short supply in some areas, coupled with rising rental costs, buying a house can seem a more attractive option for many.

While past performance can offer hints, the property market remains unpredictable. Here is the UK house price index data.

Property market forecasts for 2024

House prices, often a topic of heated discussion at dinner tables across the UK, show signs of decline. Data suggests that the blistering growth in house prices in the recent past has now been overturned.

This decrease in house prices will bring them more in line with longer-term trends.

Falling house prices are welcome news for you if you're aiming to secure a home at a reduced cost. This is ideal for investors.

What's more: the reduction in inflation will lead to lower interest rates from lenders and the UK’s central bank. A fixed low-rate mortgage option can be opted for, by the buyers, leading to reduced financial burden.

Effect of the upcoming elections

The upcoming general election introduces a level of uncertainty that might momentarily dampen the housing market.

However, the UK's consistent population expansion, coupled with the persistent housing deficit, indicates sustained strong demand for properties, particularly in the new up-and-coming locales.

London vs the rest of the UK

London's property scene stands distinct from the rest of the UK. The capital has seen house prices soar for decades.

Now, there's a slowing down, with other regions catching up.

Reports show that while London's average house price remains lofty, growth rates in cities like Birmingham, Manchester, and Liverpool outpace it.

If you're focusing on London, stay updated with its unique market dynamics.

On the other hand, if you're eyeing properties outside the capital, it might be worth waiting to see how regional markets evolve. There will most likely be more affordable prices up North, which might appeal to you.

Conversely, southern areas, traditionally pricier, might offer new opportunities now that there is a downward trend.

Wherever you choose to plant your roots, remember that a property is as much about the community, amenities, and future prospects as it is about the house itself. Before committing, research local properties, gauge the feel of neighbourhoods, and consider long-term factors like job opportunities and quality of life.

Now whether you're looking in London or elsewhere, consult with mortgage experts. They can offer tailored advice, ensuring you secure a home loan that aligns with your financial goals and lifestyle aspirations.

To buy or not to buy?

The house price growth has slowed down. Let's have a look at the present climate and possible trajectories for the house-buying market:

Predictions on house prices for the next year

Property analysts forecast varied outcomes. While many anticipate a surge in house prices, they assign it to the last quarter of 2024 or the next year. Almost everyone agrees that the prices will stagnate or keep falling for now.

A limited supply with a high demand always pushes prices up. Right now, there is a high demand with a limited supply. This might change the market trend in the near future and is perhaps a reason for you to make up your mind quickly, taking advantage of current lower prices.

But then, as the forecasts suggest, house prices will drop further, therefore, waiting for a little bit might save you more money.

If you can lock in a low mortgage rate now, it might be beneficial to buy sooner rather than later.

Impact of economic uncertainty on the housing market

The housing market isn't immune to broader economic trends. When the economy faces uncertainty, property often feels the ripple effects. Here's how:

  1. Consumer confidence: economic uncertainty can lead to decreased consumer confidence. When people are unsure about their future income or job stability, they might delay major financial decisions, like buying a house.

  2. Mortgage lender behaviour: in uncertain times, many lenders become more cautious. This could mean stricter criteria for mortgage approvals or less favourable terms.

  3. Foreign investment: the UK property market attracts considerable foreign investment. Economic instability can deter foreign investors, potentially leading to less demand and stabilising property prices.

  4. Rental property market: uncertainty might encourage some to opt for paying rent over buying, awaiting clearer economic skies. This could mean a more competitive rental market and decreased demand for purchases.

So, should you buy a house now? Weigh the current economic landscape against your own financial position and long-term goals.

If you find a property that fits your needs and budget, and you're comfortable with the prevailing mortgage rates, it might be the right time.

Buying a house is a significant decision, and it's okay to take your time.

First-time buyers in the current market

Benefits for first-time buyers

Entering the property market as a first-time buyer presents several advantages. A reduction in stamp duty has further sweetened the pot for those on the fence about making their initial property investment.

Monthly repayments can often rival what you'd pay in rent, and there's an added joy in putting money towards your own mortgage, instead of lining a landlord's pockets.

Potential pitfalls and how to avoid them

Despite the allure of buying property, first-time buyers must remain vigilant of certain pitfalls. High on this list is the threat of negative equity, where the mortgage you owe surpasses your home's market value.

To shield yourself, it's recommended you muster a substantial house deposit, ideally more than the standard 10 percent. This acts as a buffer if house prices fall.

Be wary of interest rates as well. Even a slight increase can significantly alter monthly payments.

Before securing a mortgage, always ensure you have enough money set aside for unexpected financial hiccups.

Comparing costs of renting and buying

One major factor influencing the rent vs buy decision is the monthly outlay. Monthly repayments for a mortgage, especially in today's climate with competitive mortgage interest rates, can be comparable to, or even less than, rental payments for a similar property.

While rental property costs might seem cheaper upfront, over the long term, the sum of monthly rent can eclipse that of a mortgage.

Each payment made towards a mortgage diminishes the remaining balance, contributing to increased ownership of the property.

Benefits of stepping onto the property ladder

When you buy a house, you not only secure a space to call your own but also plant a seed for future financial growth. Historically, properties have appreciated over time, meaning that a house can prove to be a good investment.

Homeowners often benefit from improved credit scores, and there's undeniable peace of mind in knowing that a living crisis, like a sudden eviction, won't catch you off-guard.

The ongoing rental cycle offers little in the way of long-term security or asset accumulation.

Shifts in mortgage rates and their implications

Mortgage rates fluctuate, influenced by various factors.

How rising interest rates influence mortgage affordability

When interest rates rise, monthly mortgage repayments can become pricier.

For buyers, this could mean higher monthly outgoings, especially if you're opting for a variable-rate mortgage. For example, a one percent hike in the interest rate can significantly increase the total amount repaid over the life of the loan.

Mortgage products tailored for first-time buyers

For those venturing into the housing market for the first time, specific mortgage products can ease the transition.

Lenders often offer deals that require a smaller down payment, making it more accessible for newcomers.

However, a lower down payment might mean higher mortgage rates in some instances.

How average property prices affect your mortgage options

Average property prices in your chosen area can dictate the kind of mortgage deals available to you. In regions where house prices continue to surge, buyers might find themselves needing a larger down payment.

Conversely, in areas where the market is steadier, you might find more lenient mortgage terms. Always compare offers based on your desired property's price range.

House purchase and seasonal considerations

Seasons can influence the housing market dynamics.

A buyer's market arises when there's a surplus of properties available, often leading to competitive pricing.

Winter, especially post-holiday January, often witnesses a lull in buying activity. Fewer buyers prowling the market could mean you're in a stronger position to negotiate on price.

Stamp duty holiday and other government incentives

The UK government occasionally introduces incentives, like thestamp duty holiday, to boost the housing market. Such schemes can save buyers thousands of pounds, making certain periods more favourable for house purchases.

Always keep an ear to the ground for announcements that might offer you a financial reprieve when you're looking to buy a house.

Understanding associated costs and fees

When you decide that the time is right to purchase a house, the listing price often takes centre stage in your budgeting. But there are additional expenses you must think about. Stamp duty, for instance, applies to many property purchases in the UK and can vary based on the property's price and location.

The initial deposit, typically a percentage of the house's price, is another immediate financial requirement. On top of these, you'll find costs for house surveys, which ensure there are no hidden issues with the property.

Legal fees, estate agents, and other hidden charges

Engaging a conveyancer or a solicitor to manage the legal aspects of a house purchase introduces another set of fees. They handle contract preparations, property searches, and land registration.

While their expertise is invaluable, their services are not without cost. Similarly, an estate agent, though often paid by the seller, can also charge buyers in some circumstances.

Valuation fees can emerge when a lender assesses a property's worth before granting a mortgage.

Keep in mind, the potential removal costs if you're moving from one property to another.

The final sum you need for your house purchase exceeds the listing price, and recognising all associated costs can prevent financial surprises.

Same month comparisons of these fees can offer insights into potential changes in the market, helping you discern if now is a good time to buy a house. The key is to be thorough in your calculations and consultations. Aim for comprehensive clarity, so your property purchase remains a good investment.

Before deciding whether now is a good time to buy a house or not, always consider both the broader market conditions and your personal circumstances.

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