What could happen in the UK property market in 2024?

2023 has been a challenging year for the UK housing market, although it continues to defy the gloomiest predictions from earlier this year. Despite interest and mortgage rate increases, rampant inflation and a slow-down in residential buyer activity, the latest Rightmove data shows that property prices are only 1.1% lower year-on-year.

As ever, there are even pockets of the UK that have seen property prices continue to rise. Nationwide’s House Price Index even showed overall prices rising 0.2% month-on-month, for the third time this year.

High rates will begin to fall.

As we entered 2023, mortgage rates were at the highest we’ve seen for decades, still suffering from the effects of a Truss-backed budget and the Bank of England’s increases in base. At one point, a 2-year fix peaked at 6.44%.

As the year ends, mortgage rates have fallen, although the ultra-low rates we’ve seen in the past few years are going to remain a thing of the past. Stability and competition amongst lenders means that leveraging yield against mortgage rate is once again possible.

2024 is expected to see further mortgage rate drops. Zoopla predicts we may see rates of 4.5% by H2 2024. There’s also the prospect of a cut to the base rate in the second half of the year. Both should prompt more activity in the housing market.

To look closer at the mortgage market, watch our webinar with mortgage partners, The Finance Company.

Rent growth may have peaked.

Whilst property prices dipped in 2023, the rental market was in overdrive. Low affordability for would-be buyers combined with a mismatch between supply and demand meant that UK rents have risen 9.7% in the last year (Zoopla data).

In London, rental growth has slowed down, but it’s still up year-over-year. Overall, Zoopla predicts a 5% yearly increase in rents across the UK. This means, that for investors who can afford to buy property, there’s still the prospect of excellent yields.

Although demand for rentals may cool down as housing affordability improves moderately, there will still be a huge number of tenants looking for properties in in-demand cities like Manchester, the London commuter belt and Birmingham. Regionally, there’s an opportunity to enjoy +7% yields in the north of the UK.

Investment opportunities

2024 is likely to mark a combination of factors that will allow investors to capitalize on market trends.

With property prices likely to reach their lowest point before increasing, investors will be able to pick up the right properties at good prices. As CBRE says, “…we expect performance in 2024 to improve. …. Although near-term prospects for any capital appreciation appear limited, income returns will underpin an improvement to the total returns from real estate investment portfolios.”

And, with rental growth likely to have peaked, getting tenants in place quickly will allow yields to be maximized without having to drop asking rents.

As ever, our property experts are on hand to discuss your plans in 2024 and provide guidance. If you’d like to speak with us, complete the contact form below and we’ll be in touch.