UK Property Market Forecast 2024

UK house prices have remained relatively stable throughout 2023, increasing by 0.1% (House Price Index) in the first six months, with high levels of inflation, increasing interest rates and the cost-of-living crisis driving slower growth than the market has experienced over the past 5 years. It was initially predicted by Savills and JLL that UK house prices would decrease by between 6-10% this year, which is now looking unlikely as inflation begins to stabilise.

The Bank of England expects the base rate to peak at 5.5% at the beginning of 2024, and sources suggest the rate will begin to decrease by mid-2024 and stabilise at around 3% in 2026. This increase in certainty in the market is likely to mean that mortgage rates will also begin to come down, making property investment more accessible and driving property prices up.

Although investors have not experienced the growth previously seen in the UK market over the past 12 months, the acceleration of property price growth between 2020-2022 means that average UK prices have still increased by 25.9% over the past 5 years.

It’s expected that during 2024, London property prices will begin to see a revival after several years of stagnation, and the Midlands, the South East and East of England will show the strongest price growth outside of the capital, mainly driven by chronic undersupply and their greater capacity for growth.

It was announced in August 2023 that renting is now officially cheaper than buying in terms of monthly payments for the first time since 2010, meaning that the rental market has continued to grow from strength to strength.

Driven by people moving back to UK city centres following the ‘exodus’ during the pandemic, chronic undersupply of new properties in the market and a huge increase in demand, average rental prices throughout the UK increased by 5.1% in the 12 months to June 2023.  JLL expects that rental prices will grow by 15.9% between 2023-2027, as the UK market continues to grow alongside increased demand.

This is following exceptional rental price rises in a number of UK regions, particularly the West Midlands, which saw 5.4% over the last year – the leading growth in the country.

With the UK economy faring better than expected in terms of unemployment and GDP growth, the UK property market forecast suggests that this rental growth is sustainable going forward.

Demand from buyers for UK property has reduced during 2023, as inflation and rising interest rates affect affordability and encourage homeowners to stay put and tenants to remain in the rental market.

The number of residential transactions has reduced year-on-year, with 22% fewer transactions taking place in July 2023 than in July 2022. Whilst demand for purchasing property has waned, the opposite has been seen in the rental market, with the BBC stating that tenant demand has risen by more than 50% above typical levels.

Despite a decrease in transactions, the UK still has a huge housing shortage, with the government setting out to supply between 300,000 new homes per year and only achieving 233,000 in 2021/2022. Sources suggest that there is a total deficit of more than 4.3 million homes in the UK market, which would take more than half a century to fill with the government’s current target.

The undersupply in the UK market is only adding to the increase in tenant demand across many key UK regions, especially those with a young population such as Derby and Birmingham where more than 48% and 60% of the population are under 35 respectively. This highlights the potential for investment returns from a young professional market that is increasingly likely to rent.

According to the Office for National Statistics (ONS), UK GDP grew by 0.2% in Q2 2023, with the UK economy now sitting at 0.8% above pre-pandemic levels.

Recent forecasts indicate that the UK will avoid a recession as energy prices stabilise and inflation continues to fall. GDP growth predictions remain conservative for 2024, with KPMG predicting 1.1% growth in 2024.

The British Chambers of Commerce’s (BCC) latest Quarterly Economic survey has shown a significant uptick in business confidence from 2022, which will likely result in increased investment. BCC now predicts that business investment will grow by 1.3% in 2023, a revised forecast from their previously predicted 0.2%.

Finally, BCC have warned that growth will remain low, with SME’s reporting tough trading conditions in 2023 and uncertainty still hanging over the UK economy, despite the reduction in political turbulence this year.

JLL predictions suggest that UK city centres will experience the highest price growth between 2023-2027, with the most significant forecast growth being in Manchester (19.3%) and Birmingham (19.2%). These cities are also predicted to experience the highest rental price growth in the same period – 21.6% and 19.3% respectively.

In 2024 specifically, JLL has forecast price growth of 2.5 and 2% in both of these regions, largely driven by the potential ceiling for growth and the standard of amenities being created within key cities.

Going forward, growth in the UK – particularly in cities – will be dictated by demand for property and interest rates. While rates are expected to fluctuate in the years to come, the consensus is that there’s enough demand in the market to sustain the current levels of activity.