According to the latest Zoopla House Price Index, UK house prices are currently overvalued by 8%. However, this is expected to be corrected by the end of 2024. Homebuyer affordability will improve as incomes rise and mortgage terms lengthen, which will drive moderate growth in home sales and house prices.

House price inflation is currently holding at 0% but is expected to rise to 1.5% by the end of this year.Richard Donnell, Zoopla's executive director, said: 'The housing market is gradually adapting to higher borrowing costs through a combination of a moderate fall in house prices and rising incomes. Homebuyers using mortgages are also relying on longer mortgage terms to increase their purchasing power to afford housing."

Home sales continue to grow, although the election campaign has had a limited impact on market activity and the seasonal slowdown of the summer months is setting in. More homes for sale means more buyers are looking to complete their purchases later in the year. Donnell added: "The timing of the first benchmark rate cut will be key to boosting market sentiment and sales activity. Overall, we expect house prices to rise by 1.5% in 2024."

Looking ahead to 2024, market sales are expected to reach 1.1 million units, up from 2023 but still below the average of the past 20 years. Currently, 75 percent of sales have been completed or agreed upon, with 250,000 deals yet to be agreed upon.

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Based on market forecasts for base rates, mortgage rates are expected to remain in the 4-4.5% range, which Zoopla believes will be sufficient to support sales volume and low single-digit home price growth.

There are notable differences in home price performance by region. House prices in the East and South East regions fell by 1.4% and 1% respectively, with Canterbury in Kent experiencing the largest fall in house prices at 4.1%. In contrast, house prices rose by 3.3% in Northern Ireland, 1.5% in the North West and 5.2% in Sunderland.

Donnell noted that despite facing high borrowing costs, the housing market is adapting to the new economic climate through a modest adjustment in house prices and rising incomes. Extending mortgage terms has become an important tool for many homebuyers to increase their purchasing power, thus enabling them to afford higher prices.

At the same time, more homes for sale are coming on the market, which gives more buyers the opportunity to close on a home later in the year. Donnell emphasized that the first cut in the benchmark interest rate will be a pivotal moment for market sentiment and sales activity. This change is expected to further drive home prices higher in the coming months.

Looking ahead to 2024, the overall outlook for the market is relatively positive. While sales will rise, they will still be below the average of the past 20 years.Zoopla expects the market to sell 1.1 million units in 2024. While this is an increase from 2023, it still reflects a recovery in the market after a period of adjustment.

Mortgage rates are now expected to remain in the 4-4.5% range. This level of interest rates will help maintain steady growth in sales volume and home prices. Despite the decline in house prices in some areas, the overall market performance remains strong, particularly in Northern Ireland and the North West, where the upward momentum in house prices is still evident.