MARKET INSIGHT
RPA november UK Market Report
UK Housing Market Surges: Fastest Price Growth in Two Years
December 4, 2024 • Author: Richard Bradstock
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We end the year on a high: UK house prices rising at their fastest pace in two years. Prices rose by 3.7% in November according to data from Nationwide, the biggest jump since November 2022 as the market responded to the Bank of England’s interest rate cut and buyers sought to kick start their purchases before the stamp duty threshold relief drops in April. Read on for a clear picture of the property market to take you into 2025 with plenty of festive cheer…
The start of a steep rise in prices?
A marked improvement in inflation has led to more favourable rates and affordability criteria balancing in the lending market. If Goldman Sach’s predictions for interest rates to be as low as 2.5% in the next nine months then we’re in for a house price bonanza in 2025 and beyond. Already, mortgage approvals are up 49% year-on-year according to the government’s House Market Key Economic Indicators data, a percentage we expect to increase again in the coming months as both first time buyers, upsizers and investors seek to buy, offsetting what is usually a quiet period for the UK housing market.
Key takeaways from the most recent Zoopla report present a positive picture for the UK property market. In summary:
The UK housing market appears to have now adjusted to higher borrowing costs.
Closing out 2024, all UK regions have recorded positive year-on-year house price growth.
Lenders are expected to be more innovative with their affordability assessments in 2025 to support increased demand.
The house price forecast of +2.5% for 2025 seems to be one in consensus, Savills and Knight Frank also concurring. Expanding further, Zoopla predicts a +7.5% rise in prices nationally over the next three years. Now might be a good time to remind ourselves of the other Big Three forecasts released in November, but before we cosy up into a cup of consensus we would also like to bring it to your attention that Rightmove has pulled out a very bullish +4% house price increase for 2025 – and we like it!
UK & London house price & rental five-year forecasts 2025-2029
Savills also released predictions for the regions with the top performers over the next five years.
Savills 5-Year Regional House Price Growth Forecasts
North West
West Midlands
East Midlands
East of England
South East
Meanwhile, recently released mortgage application data from Paragon Bank showed the effect increased rents are having on yields with some real regional winners. Average yields have risen substantially (and for some, surprisingly); the bank reporting an average yield of 6.72% in September. North of England investors did well at 8.02% whilst Greater London hit 5.52%, a very strong average for the capital. Russell Anderson, director at Paragon commented, “This data is based on offers, so you would expect yield performance to be even better on existing property in landlords’ portfolios, which would have benefited from a longer period of both house price and rental value growth since acquisition.”
Now we’ve established that now is a good time to buy, what of lending?
CEO
Donna Spencer
We spoke to Donna Spencer, CEO of the International Property Finance Group who gave us her expert view on the present UK mortgage market through the lens of overseas investors. Essential reading for anyone looking to buy with finance:
UK mortgage lending for overseas investors:
“The Bank of England recently reduced its base rate to 4.75%, signalling the start of a stabilisation phase after two years of steep rate increases. These hikes were necessary to combat inflation. Overall, the UK banking sector has reacted cautiously to the new Labour government and the recent increase in inflation. Rising inflation, which jumped back to 2.3% in October 2024, has surprised economists, with energy costs being a significant driver. The inflationary pressure has raised concerns about potential limits on the Bank of England's ability to continue cutting interest rates. This could affect mortgage costs and the broader economic recovery.
From a market perspective, Labour's focus on stabilising the economy while addressing the cost-of-living crisis is being scrutinised. Financial institutions are weighing the potential impacts of Labour's fiscal policies, particularly around taxation and public spending. Banking leaders are closely watching how Labour’s approach to managing public finances will influence borrowing conditions and business confidence. On the broader economic outlook, the Bank of England and analysts anticipate inflation to remain elevated above the 2% target through 2025 before easing. This suggests a continued challenging environment for both consumers and investors, with mortgage rates likely to remain under pressure.
Meanwhile, SONIA rates, which reflect the cost banks incur to borrow from each other, have followed suit, offering a more predictable lending environment. This is positive news for investors, as mortgage products often price against SONIA rather than directly mirroring the base rate.
Experts predict a further decrease in rates, potentially to 4.5% by late 2024, depending on inflation and global economic conditions. While these are cautious steps, they offer hope for a more favourable borrowing climate in the near future
For property investors and mortgage holders, this signals a possible easing in mortgage rates by mid-2024, though the timeline for substantial rate cuts may extend into 2025. This outlook encourages cautious optimism but underscores the need for robust financial planning.”
Please, if you’re looking for current finance deals, reach out and we’ll put you in touch with Donna and her team.
The RPA View
It seems we’ve come full circle, and we echo what we said at the beginning, we’re finishing 2024 on a high. Investors should approach 2025 as one of opportunity; there are plenty of reasons to be positive – and even more data to support such a stance. And if you don’t want to take our word for it, perhaps the words of Robert Gardner, Chief Economist at Nationwide will persuade you of the better things to come in 2025 for UK property investors:
“Providing the economy continues to recover steadily, as we expect, the underlying pace of housing market activity is likely to continue to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth.”
So, put that investment property on your Christmas list – and we’ll deliver it for you! We wish all our clients and readers a very happy and healthy festive period and we look forward to bringing you the best UK property investments in 2025 and beyond…
Season’s Greetings from all of us at RPA.
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About the author
Founder & Managing Director
richard bradstock
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.
