Prices to bottom out, but activity will remain soft

Surprisingly resilient demand, high inflation, and limited supply mean a severe drop in house prices will be avoided. With the peak in mortgage rates now behind us and the labour market in good shape, there is no clear trigger for another significant leg down in prices. Our central forecast is that prices fall by just 1.5% in 2024. That said, high mortgage costs will mean mortgaged demand remains very weak, supressing overall transactions and causing a deep contraction in housebuilding. Things should improve in 2025, after the first cut in Bank Rate next autumn facilitates larger falls in mortgage rates, improving affordability to the extent needed for demand to recover.