UK PROPERTY MARKET update: MARCH 2024
April 2, 2024
Like the spring flowers pushing up through the earth, house prices are rising and like the April showers falling from the sky, mortgage rates are coming down. It appears the new season has brought with it the coming of a new market. Leading commentators and agents are revising their growth figures for 2024 and the window of opportunity to buy at an advantageous price is closing.
Read on to find out what’s driving the UK property market’s spring awakening.
UK housing market activity steps up significantly
March marked the first positive annual UK average price growth since January 2023. On the back of this, Halifax released data that average prices were only £1,800 off the June 2022 peak. This is a compelling stat, evidence of only a very slight market easing and a far – far! – cry from the doom and gloom media headlines of 2023.
Looking at month-on-month data, UK average house prices increased by 1.5% between February and March above the usual historic average of 1% usually expected in the month of March. This is the biggest increase in 10 months. Knight Frank announced it was revising its earlier house price forecasts to say they were anticipating a 3% rise in prices this year – many had forecast zero growth, certainly no more than 1%.
Ladies and gentlemen, the data is telling us a story, a story that we are reaching a tipping point in the market, one where it is about to pivot from a market that favoured buyers to one that will very soon favour sellers, underpinned by rising prices, buyers flooding back onto the market again and an all-time low of new housing stock.
Rate of inflation surprises all, leading to lower rates in the mortgage market
Inflation surprised all (in the best possible way) dropping to lower than expected at 3.4%. The Bank of England held steady on the base rate at 5.25% following its March meeting – the next one due in early May. A flurry of statements from economist carried across the City and business pages predicted that interest rates could fall to 3% next year with the BoE forced to cut interest rates quicker than expected because of ‘plummeting’ inflation. It’s widely expected the first cut will come in June. What does this mean for mortgage rates? Already we’re seeing a preference for 2-year fixes in the market, buoyed by the certainty of the direction of travel of mortgage rates, whilst several lenders in March were offering five-year fixes under 4.5%.
Record rents pushing more people to buy, mortgages no longer the main barrier
What’s really pushing more and more buyers back onto the market is the sheer expense of rent which is now at all time high. Stats released by the ONS showed London rents rose by 10.6% in the year end to February, their highest since the ONS began recording the data. It should therefore come as no surprise that London saw the sharpest increase in buyer demand. Agents Chestertons said it saw an 18% jump in demand from buyers in February alone. Concerns about the cost of rent are now trumping concern over steeper mortgage rates. For many buyers, owning a home is now a cheaper – and more viable option – than renting.
Unlike last month, lenders were quick to pass on lower rates pretty much immediately, seeing an end to the recent posturing we’ve seen. Affordability of mortgages, it appears, are no longer the chief concern amongst those looking to buy property – either for investment or homeownership.
If the BoE does start to slice the base rate in June then we expect flurry of activity and rising demand as domestic buyers re- enter the market.
All this to say, that we are witnessing a tipping point in the market and the imminent prospect of house prices beginning to rise abruptly once again, particularly the cost of new build homes due to the historic all-time low of stock. We encourage all our clients and would-be investors looking to purchase property to do so sooner rather than later to lock in the most favourable returns and yields over the medium to long term. With reasonable lending rates hitting the market once again and prices beginning to rise, the window of opportunity to buy at a more favourable price is closing rapidly.
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about the AUTHOR
GEORGE RADFORD
Managing Director
George is the co-founder of RPA Group and Managing Director of the business in the UK and Africa. A qualified Chartered Surveyor (MRICS) with almost 20 years of property investment experience, George has helped his clients to successfully grow and strengthen residential property portfolios over multiple markets and territories. Active in building and advising upon his client’s investments, George is now focusing on procuring UK investments exclusively for RPA Group clients and investors, providing insightful and strategic advice and opportunities.