UK Property Market Update – Q3 2024

Perhaps the most significant change since the last quarterly property market update has been the change in UK government from Rishi Sunak’s Conservative government to Sir Kier Starmer’s Labour. As Labour has come to power, they have put into action a variety of new policies that are set to impact the property investment market. Here’s what they have promised to do for the UK property market in a nutshell:

• Build 1.85 million new homes over the next 5 years
• Reform the planning system to remove bureaucratic barriers to construction
• Create ‘new Labour towns’, primarily on the outskirts of large cities
• Construct new homes units on ‘grey-belt’ land, a new term for low-quality greenbelt land

How will this impact property investors? The impact of these proposed changes will most likely not be felt for a number of years, but the promise of more housing provision and faster delivery is certainly promising for investors, providing more ample opportunity for investment and portfolio diversification. The idea of new Labour towns, complete with modern infrastructure and jobs, is a particularly appealing premise for investors keeping a keen eye on the best places to invest in UK property by providing exciting new investment hotspots. Finally, the declassification of some greenbelt plots is particularly promising for investors, as we anticipate the construction of new build properties in strategic locations outside of thriving towns and cities, creating new commuter haven developments.

On August 1, the Bank of England’s Monetary Policy Committee (MPC) lowered the base interest rate to 5 percent, marking a quarter-point reduction. This decision is notable as it is the first rate cut since 2020, ending a year-long period during which rates remained at their highest level since the 2008 financial crisis.

For property investors, both within the UK and abroad, this decrease in the base rate opens up numerous opportunities. The reduction is likely to encourage investors who had been hesitant to re-enter the market, boosting confidence in the property sector and its positive outlook.

With borrowing costs now lower, investors stand to benefit from improved profitability on rental properties. They can take advantage of these reduced rates to finance additional property acquisitions, renovations, or expansions, thereby enhancing their returns and fostering greater portfolio growth and diversification. Moreover, the expected increase in buyer activity could lead to rising property values, offering investors potential capital gains. Those who act quickly may be able to take advantage of the current market conditions before property prices adjust to reflect the new interest rate environment.

Speaking of growth, the property market has seen some significant growth since the last Joseph Mews property market update. The most recent information from the UK House Price Index puts the average property value at £285,201, which shows healthy growth since the same time last year where values sat at £278,941. This represents a 12-month property value growth of 2.24%, which is far better than many have suggested, with Savills predicting last year that overall property values would actually decrease by 3% by the end of the year. This growth of 2.24% over the past 12 months is certainly not indicative of the 3% fall that Savills forecast, and many property companies are re-evaluating their predictions in order to reflect this positive movement across the property market.

As for rental price growth, growth has been significant. In fact, the ONS have stated that the average UK private rent saw a boost of  8.6% in the 12 months to June 2024. Annual rental price growth seems to be significant in Manchester (+12.3% annual change), York (+12.2% annual change) and Birmingham (11.4%), which is inkeeping with our predictions for the best places to invest in the UK in 2025.

Knight Frank

Knight Frank’s research over the last quarter has shown that the number of sales agreed has increased by 15% this summer when compared to the summer of 2023 despite the perceived uncertainty of the general election. As such, their general outlook on the UK economy and the housing market is markedly positive.

In another report, Knight Frank unveiled that one fifth of individuals they have surveyed have decided to delay their plans to purchase a home until Autumn, or at least until after the UK general election had passed. As such, here at Joseph Mews we are anticipating an increased level of activity from investors.

Savills

As for Savills, they have recently revised their residential property forecast for the period 2024 to 2028, saying that the property market has outperformed prior predictions for the first part of 2024 as values have increased by 1.1% from January to May. As such, Savills have adjusted their predictions for the UK property market, stating that we should end 2024 having seen a 2.5% increase in property values. This is a significant boost considering that Savills stated in November 2023 that they anticipated a 3% fall in property values, which is a testament to market performance in the first half of the year.

Colliers

Colliers released their seventh edition of the top UK Residential Investment Cities. Based on factors such as the local property market, sustainability and regional economics, they claimed that Edinburgh was the top spot for UK residential investment, followed by Glasgow and Manchester.

Their latest Residential Snapshot also claimed that the UK real estate market was performing remarkably well, with investors feeling the positive impact of the 6.8% rental price increase from Q1 2023 to Q1 2024. Confidence in the market is reflected by the increase in mortgage approvals from 151,000 in Q4 2023 to 178,000 in Q1 2024.