UK Property Market in 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.
Derby City Centre
A remarkable development in the heart of Derby
1 & 2 Bedroom apartments available
Derby property prices set to increase by 17.5% by 2026 (JLL)
Derby rental prices set to increase by 12% by 2026 (JLL)
Just a few minutes walk from Derby city centre
City-centre properties achieving average yields of 6.07%
20% Deposit required
Estimated completion Q4 2024
UK Rental Market in 2024
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.
UK Supply & Demand
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.
Want to know more about the UK property market for 2024? Download the UK Investment Guide today and discover everything you need to know about UK property investment in the new year. In this guide you’ll find:
- Current market performance
- Forecasts for the UK property market in 2024
- Key trends impacting the market
- Best places to invest in 2024
UK Economic Performance in 2024
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.
Strong City Centre Performance
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.
Frequently Asked Questions
Is buy-to-let a good investment?
If you were to measure how ‘good’ a buy-to-let investment is based on its past performance, this asset would probably come out on top. However, different assets will suit some more than others based on their financial goals.
If you’re looking for a resilient asset that can offer a passive income as well as the opportunity for capital growth, buy-to-let property could be the best asset for you.
With 8.9% price growth in the UK on the horizon, along with 15.9% increases in rents by 2027, forecasts suggest that buy-to-let property could be the route to financial freedom for many investors.
Is buy-to-let worth it?
When it comes to investing there’s generally no ‘one size fits all’ approach and buy-to-let property will suit some investors more than others.
However, for those who are looking for a long-term investment asset with a track record of competitive growth and more price increases on the horizon, buy-to-let is often the best option.
Buy-to-let is a flexible investment assets and can offer diversification across a wider portfolio. It’s historically one of the most stable assets and is much less exposed to external factors, plus it’s a physical asset, which makes it appealing with certain investors.
The answer to ‘is it worth it?’ depends entirely on how you use it. If you use it as a long-term asset, it’s proven to be a potentially lucrative investment vehicle that can be scaled effectively.
Why invest in UK property?
UK property is recognised as one of the most appealing investment assets across the world. In comparison to other markets, the UK property market is not only resilient, but it can offer consistent short- and long-term returns.
While rental income can usually cover the monthly payments of the property and then some, this asset also grows over time. UK property prices have been on an upward trajectory for the best part of 10 years, with the average property price now 65% higher than it was 10 years ago.
Will prices fall in the UK?
After the unexpected growth in property prices in the UK throughout 2020 and much of 2021, a sudden fall in prices was expected, especially with the end of the Stamp Duty holiday.
However, UK property price forecasts expect property prices will continue growing for the next two years, at least. Finishing 2021 on 5% price growth, followed by 4.5% increases in 2022 and 4.5% the following year, forecasts are not anticipating decreases in average property prices across the UK until 2026, at least.
Where to invest in buy-to-let in the UK?
Understanding where to invest in buy-to-let in the UK continues to be a tough decision for many investors, especially with so many potential locations in the country.
The best way to answer this question is to establish what you’re looking to achieve. Do you have short or long-term goals? Are you looking for capital growth or rental yields?
If you’re looking for more immediate rental returns, you’ll need a location with high yields and strong tenant demand.
On the other hand, if you’re investing for capital growth, you’ll want to identify areas that are regenerating and redeveloping the surroundings. This kind of activity often pushes property prices higher, which can deliver appreciation over time.
If you’re looking to find the best places to invest in the UK in 2022, why not check out our list here?
What is a good rental yield on property in the UK?
Rental yields are arguably one of the most important metrics for prospective investors to consider, but what is a good rental yield?
The average rental yield in the UK currently sits at 3.63%, meaning anything over this amount is considered an above average – or good – rental yield.
The likes of Birmingham and Derby are far surpassing the UK average and are prime examples of some of the highest rental yields in the UK. While Derby’s average rental yield currently stands at around 4.20%, buy-to-let property across Birmingham has pushed the city’s average rental yield to 6.56%.