UK house prices are currently 8% over-valued – but this phenomenon should be over by the end of 2024, Zoopla said in its house price index.
This is because rising incomes and longer mortgage terms should aid affordability, which should drive sales volumes as well as single digit house price growth.
As it stands house price inflation is flat at 0%, though it’s expected to rise to 1.5% by the end of the year.
Richard Donnell, executive director at Zoopla, said: “The housing market continues to adjust to higher borrowing costs through modest house price falls and rising incomes. Buyers using mortgages are also relying on longer mortgage terms to gain that extra few percentage points of buying power to afford a home.
“The general election campaign has had a limited impact on market activity although the seasonal summer slowdown is arriving. Sales agreed continued to increase and more homes for sale means more buyers looking to move in the second half of the year.
“The timing of the first cut in the base rate is a key moment and will give a boost to both market sentiment and sales activity. Overall we expect house prices to be 1.5% higher over 2024.”
The market is on track for 1.1 million sales in 2024, rising from 2023 but standing below the 20-year average.
Three quarters (75%) of these sales are either completed or agreed and working toward a completion – with a quarter of a million sales yet to be agreed.
Based on city forecasts for base rates, mortgage rates are expected to remain in the 4-4.5% range, which Zoopla said is sufficient to support sales volumes and low, single digit levels of house price growth.
House prices are currently falling in the East (-1.4%) and South East (-1%), with Canterbury in Kent topping the list with the biggest price fall (-4.1%).
In contrast, they rose by 3.3% in Northern Ireland and 1.5% in the North West, with Sunderland experiencing a 5.2% price increase.
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