Land Registry house price and ONS rental data - reaction

Brace yourselves for an influx of house hunters in the coming months. The Chancellor's plan is finally working as Rishi and Jeremy give inflation a good kicking. Clearly, the ripple effect of this good news is about to hit the housing scene. We're talking lower mortgage rates, boosting buyer confidence and turning people's property dreams into reality. But, hang on, it's not all sunshine and rainbows. We still have a nationwide puzzle to solve – there's just not enough housing stock in the market. While demand is improving, supply is not. 2024 is likely to see a steady climb in house prices. For the property market to go from zero to hero, we need inflation to keep doing its disappearing act. And how about the Bank of England throwing in a rate cut for good measure? That's the secret sauce we need to supercharge the housing game in 2024.

Lower inflation is leading to lower mortgage rates. Once mortgage rates for those with just a 10% deposit start with a four, don’t be surprised if we see several months of pent-up demand explode and house prices start to surge again. With wage increases now exceeding inflation, this means people can borrow more, which will push up house prices. Boxing Day is the busiest day of the year for Rightmove. If mortgage rates continue to head down, I think their servers might need upgrading this year.

Though this data shows house prices were very slightly in the red in the 12 months to September, the undersupply of housing in the UK is supporting house prices and preventing huge drops. The UK has not met its housing supply target since the Second World War. The government's current target is to build 300,000 new homes per year, but the actual number of homes being built is far below this. In 2022, only 179,300 new homes were built. So while price growth may drop momentarily, as we have seen with the September Land Registry house price index, the long-term growth will still be there.

With a splurge of positive data and rate reductions in recent weeks, buyer sentiment has noticeably changed in Scotland and it's clear that pent-up demand from those who have been sitting on the sidelines for most of 2023 seems likely to burst onto the market in the early part of 2024. In such a fast-moving environment, house price data does lag significantly behind the here and now but although fluctuations in values are likely to emerge from the data in the coming months, the key factors remain that the Scottish property market has stayed robust throughout a difficult year and with buyer confidence improving and affordability for borrowers set to improve, the scene seems set for steady and manageable house price growth throughout 2024. The outlook for landlords and renters is perhaps less rosey as government interventions, onerous regulations and a serious lack of supply of suitable properties for rent, mean that rapid increases in average rents will continue.

The higher-than-anticipated drop in inflation, down from 6.7 to 4.6% in October, should signal the beginning of the end of house price drops. Yes, there may be a continuation of low or negative house prices for some months to come as the Land Registry data catches up with the market, but this morning's inflation figures will certainly help to stabilise the property market. Consumer confidence is key, and with the lower inflation numbers, this will inevitably lead to lower mortgage rates as swap rates continue to fall. All of a sudden, those would-be buyers who were previously sat on the fence as to whether to buy are now peering more confidently over the other side, seeing what their new mortgage payments will be. The good news is that they continue to drop to a much more affordable level.

The property market may be down, based on this latest data, but following today's inflation news it is by no means out. The time lag is key and things have improved materially for borrowers in recent months. The sharp fall in inflation in October will likely support the property market as lenders further reduce mortgage rates and sentiment picks up as households feel the financial pressure relent a little. However, let's not forget that a significant number of borrowers are still to come off their ultra-low fixed rates, which could see an increase in forced sales and therefore supply, putting downward pressure on prices in 2024. Any announcement of a stamp duty cut or holiday in the Autumn Statement could also change the direction of travel quite quickly. The direction of house prices could change on a dime in the current economic climate.

Yes, this data makes the property market seem down and out but expect more people to start buying following the positive news that the UK is finally getting to grips with inflation. That will translate into lower mortgage rates, which will boost buyer confidence. There is a big nationwide problem at the moment, however, which is the lack of supply and properties coming to market, although clearly this is helping support house prices. We expect 2024 to be a good, if not stellar, year for the property market and a gradual return to slow but steady house price growth, as demand begins to pick up.

House prices, despite the increases in October announced by the Halifax and Nationwide, are falling sharply in my opinion. What I believe is happening is that more transactions are happening at the higher end of the market so average transaction values are increasing, whilst property prices themselves are falling. My best guess is that property values won't stabilise until average mortgage rates are around 4.5%.

The obsession with generalising the housing market into one big barometer of success has to stop. Many local councils are on the verge of going bust due to the lack of affordable council housing resulting in some local councils spending up to 50% of their total budget on temporary accommodation. House prices increasing is a negative for local councils, a negative for first time buyers and only benefits those that already own property. We should measure the success of the housing market on the number of affordable homes we build and eradicating housing lists and reducing spend on temporary accommodation.