Bright future ahead for UK’s resilient property market

August 5, 2024

While the last two years have been challenging for UK property, the market is resilient and a brighter future is ahead for homebuyers and investors.

High inflation, cost of living increases, rising interest rates and more combined to present a challenge for UK property in 2022 and 2023. As mortgages became more expensive and people’s disposable income fell, many wondered whether we were about to enter a market downturn following years of prosperity and growth.

However, what we have seen so far in 2024 has eased those doubts and acted as a reminder of just how resilient UK property is.

Where the average house price fell last year, we have now seen a firm return to growth. The latest Savills UK Housing Market Update from June 2024 shows that house prices increased by 0.4% in May, and total growth has reached 1.3% for the year to date.

That is excellent news for all property owners – especially given the predictions of doom and gloom that were offered a year ago.

That assessment was agreed with by Nationwide, one of the UK’s leading sources of property data. Robert Gardner, Nationwide’s chief economist, said: “The market appears to be showing signs of resilience in the face of ongoing affordability pressures following the rise in longer-term interest rates in recent months.”

“Consumer confidence has improved noticeably over the last few months, supported by solid wage gains and lower inflation.”

The resilience in the market is also shown by a pair of economic indicators reported by Halifax in their latest price index.

Firstly, property transactions increased by 2.4% in May and ended the month 17.2% higher year-on-year. Secondly, mortgage approvals remained significantly higher than last year as interest in property purchases stay strong.

Property transactions also increased in May 2024, up by 2.4% from April and 17.2% higher than the previous year. While mortgage approvals slightly decreased month-on-month, they remained significantly higher than last year, indicating continued interest in property purchases.

Looking ahead to the rest of the year, Zoopla has estimated that we could see a total of 1.5% growth in 2024. By the end of 2028, property prices could have gone up by as much as 21.6% - making this an ideal time to buy property if you are interested in capital appreciation.

The resilience of the UK property market is also on display when looking at rents.

The rental market grew very fast during the Covid-19 pandemic and has continued to do so since. While housing market activity has picked up, it is still the case that a huge number of people cannot afford to buy a home of their own and are turning to renting as a long-term option.

However, the reality of renting in the UK is that there are nowhere near enough properties to go around. It has been estimated by the government that at least 300,000 new homes are needed each year to ease rental demand and open up home ownership for everyone who wants it – a level of construction the new government has committed to.

But even if they achieve their target, which is unlikely based on previous construction rates, there will still not be enough to go round and people will rent for life.

Following double-digit rental rises in 2023, the average rent has already increased by 6.6% this year according to Zoopla figures. Some locations, like Manchester (8.1%) and Birmingham (7.6%) continue to exceed that national rental growth average. Furthermore, the demand in the market means that there is considerably more room for further growth, too.

Richard Donnell, executive director of research at Zoopla, said: “Competition remains high, with 15 households chasing every rental home. This is more than double the pre-pandemic average of just six which was seen between 2017-2020.”

JLL joins Zoopla in this, predicting that we will see as much as 18.8% additional growth in UK residential rents by the end of 2028.

It is clear that the UK housing market is in a good place. Both house prices and rents are growing again, with mortgage rates beginning to fall in the background in anticipation of a late-summer cut in the Bank of England’s base rate.

In the meantime, confidence in the market remains high and all indications are that this is a good time to buy property. The resilience of UK property means that prices are rising now and forecasts for the future are good.

Want to learn more about UK property and the best places to buy? Get in touch with the team today for a consultation.

Bright future ahead for UK’s resilient property market

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