Why investors have six months to buy UK property before prices start to rise?
April 26, 2024
So far in 2024 we’ve been advising clients that now is best time to buy UK investment property. The latest data released this month (March) looks like that window of opportunity is closing. The chance to buy at ‘a steal’ is about to be eclipsed by a chain reaction that could send UK property prices stratospheric. Here’s why…
Currently in the UK properties are reasonably priced. We’re still in a buyer’s market. But not for long…
STEEP RENTS ARE TRUMPING CONCERN OVER HIGHER LENDING RATES COAXING BUYERS BACK ONTO MARKET
1
2020-2023
RENTAL INCREASES
(Zoopla)
• MANCHESTER UP
37.8
36.5
• LONDON UP
UK rents have now risen so much (especially in London) that buyers are no longer concerned about the higher lending rates but the amount of money they’re ‘wasting’ on rent. Buyers are now returning to the market as current mortgage payments even at higher rates are proving cheaper than the cost of rent.
EVIDENCE
Average UK rents rose by 9% in the year to February and 10.6% in London; the highest since the ONS began publishing the index.
Chestertons reported an 18% jump in London sales in February.
Average UK property prices (UK House Price Index) increased by 1.5% in March 2024. Highest leaps were in:
INFLATION IS COMING DOWN QUICKER THAN EXPECTED WITH BoE RATE CUTS NOW FORECAST FOR SUMMER
2
“ Our view that inflation will fall below 2% in April and then ease towards 1% suggests the BoE may have to start cutting rates in the summer and reduce them to 3% next year. “
Paul Dales Chief Economist, Capital Economics
UK inflation fell to in February to its lowest level for 2.5 years. The Guardian reported “Investors are betting that inflation will tumble further through the spring months, reflecting the sharp decline in the price of natural gas since last year and a slowdown in food price rises.” We would bet our last pound coin that April’s sales numbers will show another surge of buyers coming onto the market in March, drawn by the carrot of lower lending rates and the current reasonably priced market.
EVIDENCE
UK inflation fell to 3.4% in February down from 4% in January.
Chancellor of the Exchequer, Jeremy Hunt said the inflation figure “opens the door” for BoE to bring interest rates down.
UK mortgages reached a seven-month high in February 24.
Rates at 3% would see average UK mortgage holders save on £250 a month.
UK HOUSING SUPPLY AT AN ALL TIME LOW CREATING THE PERFECT STORM FOR STEEP PRICE RISES IN THE NEXT 6-12 MONTHS
3
ONE FIFTH of England’s Local Authorities have either withdrawn or paused their local plans for housing provision.
We’ve established that more buyers are spilling back onto the market, but the problem is the amount of stock available to buy is at an all-time low, meaning prices can only go one way: UP. The most recent Home Builders Federation housing pipeline report outlined a rather dire situation.
EVIDENCE
2023 saw the supply of homes in the South East down by 13%.
Number of new homes approvals in London at its lowest since 2011.
Nationally, planning permissions are down 20% year-on-year and 30% down on pre-pandemic levels.
Fewest number of sites granted planning consent since dataset began in 2006.
Policy uncertainty has led to 64 Local Authorities withdraw or pause their Local Plans – that’s over 20% of local authorities in England.
MORE BUYERS + LOWER INTEREST RATES + LOW SUPPLY
=
MAJOR PRICE INCREASES
The answer?
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about the AUTHOR
Managing Director
GEORGE RADFORD
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.