The latest housing analysis by Savills has revealed that while there has been 15% fewer completed transactions compared with the year to March 2020, this was offset by 1% higher average sale prices.
Using data drawn from the Bank of England, HM Land Registry records, HM Revenue & Customs and the Office for National Statistics, Savills found that the total value of the UK housing market contracted by 21% in the year to March 2024, encouraged by a slower market.
This has seen activity return to its pre-pandemic size of £342bn. However, this is still lower than the level reached during the mini-housing market boom which peaked at £521bn.
Savills did however highlight that while the UK housing market has returned to pre-pandemic levels, its make-up is quite different.
Lucian Cook, Head of Residential Search at Savills, said: “The contraction of the market primarily reflects the impact that the higher costs of mortgages have had on the appetite of buyers to take on more debt, with mortgaged home movers and buy-to-let investors particularly affected.”
“Demand from equity-rich buyers has been more robust. And that from first time-buyers has stood up surprisingly well, albeit heavily supported by the Bank of Mum and Dad.”
The analysis also examined the use of equity and debt, reporting that compared to four years earlier, £20.7bn less mortgage debt was used to buy homes in the year to March 2024.
However, this was offset by an 11% rise in the use of equity during the same period.
Specifically, this was fuelled by a 19% increase in spending by cash buyers over the past four years.
This meant that in the year to March, spending by cash buyers stood at £144bn, which is equivalent to 42% of the total spend on house purchases in the UK.
Cook added: “Interest rate cuts will mean that the range of buyers coming to the market will widen, and we can expect to see their spending power pick up over the next 12 months.
“Those who have put off plans to trade up the housing ladder over the past two years are likely to underpin growth in the housing market going forward.
“Though the headwinds haven’t completely died down, we have already seen a pick-up in agreed sales on the back of more stability in the mortgage markets.
“That suggests that as rates fall, the market will return to growth, despite owners who are yet to come to the end of their fixed rate experiencing an uplift in their underlying housing costs.”
Additionally, Savills’ mainstream forecast predicts there will be a 2.5% growth in house prices this year, which is largely due to falls in the cost of mortgage debt, and 21.6% by the end of 2028.
