UK housing market returned to growth in 2024
The value of the UK housing market returned to growth last year after mortgage rates dropped and affordability constraints eased.
According to Savills, the total value of the UK housing market expanded by 6.3 per cent in 2024 to £379bn.
The increase in spending on housebuying was fuelled by first-time buyers, who collectively increased their mortgage debt by £12.2bn, or 21.4 per cent.
“The rise in first-time buyers reflects the overwhelming desire of Britons to get a foot on the housing ladder.
“Especially given the lack of choice in the private rented sector, and the double-digit rental growth tenants have experienced over the past few years,” Lucian Cook, head of residential research at Savills said.
House prices are still high relative to average earnings, with the first-time buyer (FTB) house price-to-earnings ratio standing at 5.0 at the end of 2024, still far above the long run average of 3.9.
This makes the deposit hurdle exceptionally high, something only made worse by the rental crisis, during which rents have risen far faster than wages.
But those who have been able to pull together a deposit have “continued to take the plunge, despite higher house prices and mortgage rates,” Cook said.
However, the ongoing affordability constraints mean housebuying was primarily powered by debt last year, with a £22.3bn increase in spending on house purchases matched with a £24.3bn increase in the use of mortgage debt, according to Savills.
Market to keep momentum beyond stamp duty change
Given that the increase in spending has been driven by first-time buyers, many pundits had suggested that the housing market will slow this year after stamp duty relief for first time buyers ends on April 1.
However, director of Benham and Reeves Marc von Grundherr said the general consensus is now that “growing momentum will continue to build beyond April 1 and we look set for another year of positive growth”.
Cook added that an improvement in activity among home movers will be “heavily dependent on further cuts in interest rates and an improvement in consumer confidence”.
Analysts at Capital Economics have predicted that Bank of England will cut interest rates to 3.5 per cent by early 2026, which would significantly boost activity.
Brits’ confidence, meanwhile, rose in February on better personal finances and a brighter outlook on the general economy.