UK housing costs 10-15% more than it should according to Zoopla – as prices have only fallen by -1.1% year-on-year despite escalating mortgage rates.

However Zoopla said next year incomes will rise and house prices will continue to drift by around -2%, which will ease affordability struggles.

Despite affordability being so difficult Zoopla predicted first-time buyers having a big part to play in the next two years, as many look to exit the increasingly costly rental market, which has surged in excess of mortgage rates.

Richard Donnell, executive director at Zoopla, said: “The housing market has been more resilient than many expected over 2023 but it hasn’t been a surprise to us.

“Mortgage regulations introduced in 2015 have stopped an over-valuation of housing which is why the decline in house prices has been modest over the year.

“House price falls have been concentrated in the south and midlands while prices are still slightly higher over the year in Scotland and Northern Ireland.

“UK housing still looks expensive by historic standards which is why we expect UK house prices to fall a further 2% over 2024 as prices and incomes re-align.“

Those using cash to purchase a property are on track to account for a third of all sales in 2023, with mortgaged sales set to be 30% lower as higher mortgage rates hit demand.

Activity surges at year end

The housing market experienced a busy end of the year, suggesting the market could return to health in 2024, Zoopla’s house price index has found.

In the four weeks to 17 December 2023 the average levels of new sales increased by 17% from last year, while demand was up by a fifth.

Tom Bill, head of UK residential research at Knight Frank, said: “Activity in the property market was stronger In November than September this year, which is not normally the case.

“Confidence is returning as inflation comes under control and there is growing downwards pressure on mortgage rates.

“The final weeks of 2022 were marked by the fallout from the mini-Budget, when the property market effectively closed three months early for Christmas.

“This year, it is stirring into life after a subdued summer and all the indications are that there will be a seasonal bounce next spring provided a general election is not called in the first half of 2024.”