MARKET INSIGHT
september 2024: UK PROPERTY MARKET UPDATE
October 4, 2024
Author: Richard Bradstock
After a few months of cautious optimism, the UK property market appears to be picking up pace with September seeing the fastest annual house price growth in two years. Prices are up 3.2% on an annual basis according to Nationwide.
Here’s what we know for sure about the current status quo in the UK market:
Income growth is outstripping house price growth
Borrowing costs are lowering
Northern England continues to outperform Southern England in terms of house price growth.
What does this mean for the market?
The rate of house price growth is about to increase its gradient. Feeling the benefit of having deeper pockets after a few years of feeling the squeeze, buyers will start to come back onto the market in higher volumes, increasing demand. Thus, in the coming months we may well see a transition from the current buyers’ market to one that is more markedly a sellers’ market, where houses will sell quicker and for more money.
Lower lending rates will play into this massively, spurring buyers keen to buy into action. Those who choose to wait it out a little longer might see any potential gains to be had from anticipating forthcoming lower lending deals subsumed by rising house prices. Net mortgage lending increased by £100m month on month, showing the start of an uptick in market activity. That said, Autumn usually presents a quiet time for the market, so it may not come as a surprise if we don’t immediately see consecutive increases in the run to Christmas, but it’s safe to assume they are on the horizon.
The positive effect of having more affordable housing on the market can we witnessed up North where the North West has registered a 5% annual growth in house prices to September (compared to the national average of 3.2%). We may describe this market as healthy, where employment opportunities are rife and people can afford to live in the places where they work. With rising incomes across the UK, we may see a little of this trickle down to positively affect the market down South, where we’ve still seen increases, just not as steep as those in the North.
Zoopla/Houseful’s Richard Donnell wrote that “a further modest reduction in base rates will support sales market activity and low levels of house price inflation.”
Lenders are getting creative
In the last month we’ve seen aggressive pricing from lenders. A Nationwide subsidiary announced it would lend six times an applicant’s annual salary. Conservative stress testing still remains, however, which is a good thing for the long-term health of the market. Sellers and estate agents welcomed the hotting up of the mortgage market place, commenting that it would lead to the return of bidding wars, which in turn, would drive prices up. Many are also predicting an increase in the number of mortgages being offered over longer terms such as 30-40 years, in an attempt to ease the housing affordability crisis particularly in the South East.
September saw the first sub 3.75% deal on a five-year fix with Barclays who undercut Nationwide’s offering the previous day. Mark Harris of SPF Private Clients said that these ‘subtle improvements’ would make ‘life easier’ for borrowers.
What is happening in new builds?
Since the new Labour government swept into Downing Street there has been lots of chat about housebuilding targets. Some big numbers have been bandied about, the most recent from the Housing Forum, which may hold some credence given that it’s the only cross-sector organisation that spans the entire housing industry. The Housing Forum released a statement qualifying the government’s pledge to build 1.5million new homes over the length of the current parliament, calculating that it would require 450,000 homes to be built every year by 2029.
Only 160,000 homes are expected to be delivered this year, less than half of target. We watch this space to see what measures may be put in place to bridge the ever-widening supply gap of new build homes in the UK. Until then, prices for new build homes look set to increase, particular those in affordable regions with high rental demand.
The RPA View
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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.
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