Steady as she goes

The housing market has been a roller coaster over the past several years. There was a surge of activity in a post-Covid boom, and now a drop off as economic pressures weigh down the market. In the first half of this year, approximately 480,000 homes transacted, -18% down on last year and -41% lower than the peak of the roller coaster back in 2021. 

Activity has been gradually stabilising, however, interest rates have likely peaked and the turbulence in the mortgage markets has largely settled. So while activity remains suppressed, the market continues to function. Generally cash buyers have remained more active than those needing a mortgage. And among those who rely on mortgage debt, the market has been driven far more by buyers who need to move due to a change in circumstances, with fewer discretionary buyers. 

Light at the end of the tunnel

The current low levels of activity are a function of the high rate environment, and the expectation of a more favourable mortgage market in the future. Buyers that can hold off this year will continue to do so. 

We expect market activity to remain suppressed until the middle of next year. Oxford Economics forecasts the base rate to start falling by the end of 2024, and lenders will likely start reducing rates in advance of this. This will stimulate a recovery in activity levels as it becomes more affordable to secure mortgages.

Additionally, values will have continued to slide, and the increasing affordability will also help support a return to higher levels of activity. Rates are unlikely to return to their pre-pandemic lows which means activity is likely to settle slightly below the pre-pandemic levels.