As we approach 2024, various predictions and forecasts have emerged about the potential trajectory of property prices in the city.

The Current State of the Market

As of 2023, London’s property market has seen some fluctuations. According to the Office for National Statistics (ONS), London house prices fell 1.4% in the 12 months to August¹. Despite this, London remains the most expensive region to buy a home, with an average sold price of £536,000¹.

Predictions for 2024

Looking ahead to 2024, several forecasts suggest a continued downward trend before a potential recovery. Savills, a global real estate services provider, predicts that London house prices will be down 10% since their peak by the first half of 2024². This will equate to another 4% price drop next year².

Lucian Cook, head of residential research at Savills, explains the situation: "Interest rates are expected to have peaked. The worst of the house prices falls look to be behind us, but the first cut to rates still looks to be some way off"².

David Toogood, Director of Harding Chartered Surveyors, believes that 2024 will bring a more positive outlook to London property prices, stating "2023 was a year of hesitation as interest rates went up and mortgage packages were withdrawn and there was, of course, the cost of living crisis. 2024 will be an election year and we will see all manner of false promises from our political friends which will only add to the confusion. However, there is still a pent-up demand for good quality flats and houses and we believe that buyers will overcome their hesitation and proceed so that the market will improving activity and we may see some improvement in prices".

The Long-Term Outlook

Despite the short-term challenges, the long-term outlook for London’s property market remains positive. Savills forecasts that the strongest house price growth is set for 2027, with the average London home predicted to be worth £70,376 more by 2028². By 2028, Savills predicts, the average London house price will be £577,256².

Market Drivers

Several factors are driving these predictions:

1. Interest Rate Fluctuations: The Bank of England's monetary policy, particularly the adjustments in the base rate, is a significant factor influencing the property market. If the Bank of England starts to cut the base rate by the second half of 2024, pent-up demand and a stronger economic forecast will start to drive house prices up again². Savills predicts the base rate will stand at 4.75% by the end of 2024 and then drop 1% each year until it reaches 1.75% in 2027².

2. Mortgage Rates: Pressure from mortgages. As mortgage rates rise, it puts pressure on potential buyers, which could lead to a decrease in property prices².

3. Economic Conditions: The broader economic environment, including GDP growth, employment rates, and inflation, will continue to impact buyer confidence and affordability.

4. Housing Supply and Demand: London's chronic housing shortage, coupled with population growth, continues to exert upward pressure on prices, despite short-term fluctuations.

In conclusion, while London’s property market may face some downward pressure in 2024, the long-term outlook remains positive. As always, potential buyers and investors should keep a close eye on economic indicators and market forecasts when making their decisions.