UK Property Market Update – Q2 2024

Stay in the loop with the latest UK property market updates each quarter.

Interest Rates Have Declined

The Base Rate has remained steady at 5.25% since August, and inflation has decreased to 4%. According to the OBR, we are on track to achieve the government’s 2% target in just two months, almost a year ahead of schedule. This is expected to drive property price growth, benefiting investors.

The current average interest rate for a five-year fixed-rate mortgage is 4.84%, slightly up from 4.85% last week. For a two-year fixed-rate mortgage, the current average rate stands at 5.23%, unchanged from the previous week. The lowest available rate for a five-year fixed-rate mortgage remains at 4.13%, while the lowest available rate for a two-year fixed-rate mortgage remains at 4.46%, as of the final week of March.

The steady Base Rate alongside decreasing inflation and the promising outlook for reaching the government’s inflation target ahead of schedule are likely to have significant implications for the property market.

With borrowing costs remaining relatively stable and inflationary pressures easing, there’s a potential boost for property price growth. Investors may find this environment conducive to capitalizing on opportunities in the property market, as the lower borrowing costs and improved economic outlook could fuel demand for real estate assets.

Furthermore, the availability of competitive mortgage rates, particularly for longer-term fixed-rate mortgages, may encourage both prospective homebuyers and property investors to enter the market or expand their property portfolios.

Spring Budget 2024

As for the Spring 2024 budget in March, were a few topics of interest to investors, namely the Chancellor’s amends to holiday lets, multiple dwellings relief, and capital gains tax.

Currently, there are regulations in place that provide tax incentives for short-term, furnished holiday rentals. However, Jeremy Hunt has disclosed plans to eliminate these incentives in an effort to bolster the availability of long-term rental properties, especially in tourist hubs where long-term rental options are scarce. This move aims to level the playing field between long and short-term rentals in terms of tax treatment. Nevertheless, implementation of this legislation is not slated until April 2025.

Furthermore, Multiple Dwellings Relief, initially intended to stimulate investment in the private rental sector by reducing stamp duty costs for landlords, has proven ineffective in achieving its purpose upon review. Consequently, the government has opted to revoke this relief. Additionally, Hunt has proposed a measure to benefit property investors by reducing capital gains tax. The Chancellor has lowered the higher rate of capital gains tax from 28% to 24%, aiming to stimulate increased property transactions.

Sales And Rental Price Growth

Compared to spring 2023, there’s been a notable surge in the number of homes for sale, with a staggering 20% increase. On average, each estate agent now lists approximately 30 properties.

Certain regions of the UK are experiencing particularly impressive growth, especially in areas with more affordable housing prices. Regions like Yorkshire and the Humber, as well as the North West, have witnessed significant upticks in sales, with increases of 11% and 13%, respectively. This signifies an increase in demand that similarly transfers to the rental market, making the North a fantastic place to search for your next investment.

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Sellers behaviors are also changing as the sales market stabilises and demand from buyers improves. Towards the end of 2023, nearly half of sellers were willing to offer discounts of 5% or more. However, this figure has now slightly decreased to two-fifths. Similarly, the average discount offered at the close of last year was 4.5% (£14,250). Presently, it stands at 3.9% (£10,000).

As a testament to the increase in demand for property, the number of new sales agreed has seen a remarkable 9% increase compared to a year ago. Notably, there have been 7% more home sales agreed in the first quarter of 2024 compared to the same period in 2023.

But what about the rental market? Just like the sales market, demand for rental properties is similarly increasing, with Zoopla noting that there has been a 20% year-on-year increase to rental demand. This is subsequently increasing property prices across the UK, with 51% of rental units now demanding £1000pcm or more. This spells good news for existing investors whose properties may be entering higher rental brackets.

Latest Updates From PLC’s

Knight Frank

Knight Frank published A Spring Upswing this March, showcasing their latest research. Here’s what they uncovered about the UK property market this quarter:

  • Affordability has returned to the pre-pandemic trend line.
  • Full-time workers in England can anticipate needing approximately 8.3 times their yearly income to purchase a home.

Additionally, their March Prime Yield tracker has unveiled that all forms of property across student accommodation, BTR, co-living and senior house are experiencing stable yields. However, BTR in the South East and regional single-family housing BTR units are on the most positive trajectory.

Savills

As for Savills, they have uncovered the following about the UK property market over the past quarter:

  • Recent indicators suggest an increase in activity during the initial 2 months of this year. The rise in mortgage approvals indicates a more stable mortgage market and a decrease in the cost of fixed-rate mortgages.
  • The most significant surge in  activity occurred within the price range of £300,000 to £500,000, with activity levels for the month up by 33% compared to the same period last year.
  • Properties priced above £1 million saw a 27% increase in activity.

Colliers

The Colliers UK Property Snapshot provided further detail on the state of the residential property market.

  • In January, there was a 1.1% year-on-year increase in average house prices, marking the conclusion of a ten-month streak of decreases.
  • Rental expansion, as gauged by the ONS Index of Private Housing, remained stable at an all-time peak of 6.2% year-on-year in January.

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