UK PROPERTY MARKET UPDATE: august 2024
September 03, 2024
Author: Richard Bradstock
As the summer draws to a close, schools begin their Autumn terms and we head back to the office ever seeking that elusive work/life balance, so too do we bring news of a ‘back to balance’ in the UK property market. Rate cuts, demand up, prices rising, 2024 will go down as the year the market returned to balance.
Read on for how property investors should play the present UK property market.
Back to Balance
On the first of the month the Bank of England made a widely anticipated interest rate cut, the first since March 2020 and the market responded almost immediately. At the time of writing, Rightmove reported buyer enquiries were up one fifth on the same time last year and a 3.94% deal could be found on a two-year fixed mortgage with 75% loan to value. Progress.
Interestingly, in spite of falling rates, lenders are reporting fixed year deals (particularly two year fixes) to be the most attractive, buyers keen to lock in what they know and not be held hostage to market fluctuations. The FT reported that swaps markets (used by lenders to price fixed rate mortgages) predict the base rate will be 3.5% in two years’ time. Already, we’re seeing lenders passing on these rates.
Simon Gammon of Knight Frank private finance commented,
“When rates get into ‘the 3s’ wealthy people figure: after tax I can make more than that on my money, so it’s sensible to borrow again.”
The market is now awash with buyers with a sense of urgency who have been sitting on their hands waiting for rates to fall and who are now keen to ‘lock in’ a mortgage deal and buy the properties they’ve been coveting. Zoopla said it was expecting a “late summer surge” on the back of the rate cut reporting that there was a ‘greater clarity’ amongst buyers now that the new UK government was settling in. The property portal’s figures suggest the market is on track for a 10% increase in sales on 2023 levels.
Positive Market Forecasts
According to figures from Zoopla, average UK house prices increased by 1.4% in the year to July and Nationwide was more positive at 2.1%. Savills reported it was the first time that house price growth had outpaced inflation, forecasting 2024 to see a gain of 2.5%. This is quite the turnaround considering most agencies had negative predictions for the market this year. Zoopla forecasted a decline of 2% for 2024 back in November when average mortgage rates were 6.3% for a 2-year fixed. We’re all trying to forget that as much as possible!
UK Property Market Forecast
London
Knight Frank announced they were sticking to their 3% house price growth forecast for the year, publishing a 5-year cumulative increase of 20.5% for UK property, 15.9% in Greater London and 16.4% in Prime Central London by 2028. The rental forecast was 20.5% for UK and 19.3% for Greater London, definitely showing a return to balance when one considers that rents in London soared by 17% in 2022 alone.
ONS figures are showing that average rents increased by 5.7% in the year to June, but a shortage of rental properties continues to plague the market. Zoopla reported lettings agents across the UK had a third fewer homes to rent compared with pre-pandemic averages.
The RPA View
Whilst the figures above largely concern the mainstream market, in the new build and investor sector we think prices will rise more steeply because of the lack of new homes, culminating in some sharp rises in 2028 and beyond unless present delivery increases. The latest English Housing Supply Update from Savills published at the end of Q2, stated the supply of homes had remained static since the close of 2023 with no increase:
“The effective pipeline of consented homes is below the current level of housebuilding, and a fall in supply in the immediate future is likely.”
Present construction output is 15% lower than 2019’s level, in contrast Build To Rent (BTR) completions hit their highest level on record. Institutional landlords are ruling the rental market a fact which will only push rents further. But there’s still a role for smaller scale landlords – as ever choice is critical.
The report showed London has the highest deficiency of new homes, with the majority of London boroughs delivering 50% below need. Interestingly, Manchester was highlighted as meeting need, however pockets of the city such as Trafford’s supply was 25-50% below need, as was Birmingham city-wide, thus showing areas that may bring greater returns than the average in the long-term. Returning to the theme of balance, investors looking to buy should take note how they walk the line. With prices rising and mortgage rates falling there’s no time for market plays, we’re at the beginning of the demand curve. Our advice? Buy before it steepens.
As ever, we have investments in London and Birmingham and keep an eye out for our launch of a new phase of the popular FEC development, Red Bank Riverside in Manchester in September; Kingfisher, 322 apartments occupying a prime position within the regen neighbourhood.
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In the meantime, we hope all of our clients (and readers!) enjoyed a good summer break and we look forward to bringing you more top UK property investments over the coming month.
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About the author
RPA’s founder, Richard has worked in residential development investment for 20 years and oversees the general running of the business ensuring the RPA Group retains true to its founding principles. Over his career Richard has built an incredible network of international property investors and like-minded industry professionals.
Founder & Managing Director
