EYE asked Lucian Cook, head of residential research at Savills, to tell us about the things he cannot easily predict about the housing market for 2024 and he gave us this exclusive insight.
Estate agents are being told there are signs of positivity in the market for 2024 – but what are the variables, the tricky unknowns which will dictate which way the market really goes?
With the twists and turns of the current political economy, it’s causing difficulties for the experts in knowing exactly how things are going to shape up.
Recently Savills Research issued its forecasts that the market was past ‘peak pain’ with projections of UK house price falls of just 3% in 2024.
Lucian Cook, head of residential research at Savills, managing a team of 25 researchers, told EYE: “You can only predict by having the best estimation as to what will happen in the economy and the main drivers around it in policy so forecasts are always open to disruption.
“That is just an inconvenient truth you have to live with as a researcher who has the temerity to try and work out what is going to happen next.
“Markets operate in cycles and I think next year will be a case of agents holding on; whenever you have a period of softer market conditions and a scramble for market share and more saleable stock, there is always a risk that you price high – and try and work the price down over the period.
“Remember that your track record is determined by what you sell and your sales record not necessarily by the amount of stock you have on the market.”
Cook said the biggest ‘variables’ – influencing whether the market improves or not next year are:
Mortgage costs
“Next year the most important thing that will happen will be the first interest rate cut. If interest rates don’t fall next year, it is going to be more difficult for the recovery to pick up pace quite as quickly in 2025 but if they do, it opens up more capacity for house price growth.
“It will be a gradual restoration of buyers’ buying power, especially mortgage buyers, and that is particularly pertinent to first time buyers and those on the lower rungs of the housing ladder and certainly will bring more buyers into the market.
“In the interim it will be all about cash buyers still having a competitive advantage in the market.”
General election
“There is likely to be a general election at some point next year and you tend to find there is a degree of caution and the market is slightly put on pause and it’s that I think which will inhibit a recovery in the second half of the year but the platform for that recovery will certainly be 2024.
“If we have a change of government, that will have a particular impact around expected levels of housing delivery. You can see they (Labour) have stated their aims to bring forward something that supports first time buyer activity and it looks like they will increase levels of house building and some kind of easing of the pressures of the planning system -that seems to be high on their agenda.
“They have worked out there is political mileage to be made to step into the shoes of the Conservative party and if they can increase housing delivery, that can give a shot in the arm to the wider economy.
“So, you can understand why they are seeking to make ground in that particular area. They will put more emphasis into affordable housing, I suspect. It’s not quite clear where that leaves the Private Rented Sector, that is the bigger unknown.
“The Renters Reform Bill will be the single biggest piece of legislation which will change the market. There’s quite a bit of uncertainty to what happens to investment in the rental market; my suspicions are that over the next five years, we will see investor activity more concentrated in larger, more professional landlords who carry less debt.
“This is simply because it is more difficult for a smaller investor who has a meaningful mortgage requirement to make the maths add up and the additional regulations in the offing compound that.
“Next year will be important – it should mark the point where you get through the housing market correction; it does depend on the general election, but will set the platform for a much stronger market going into 2025.
“However, there are always things you don’t and can’t anticipate and that’s the thing you always let yourself open to when you do your forecast.”
