Cautious Optimism Returns, but Location is Key
The UK property market is starting to show signs of positivity, but savvy investors should pay close attention to location. Recent analyses from leading property sources like Savills highlight key trends and projections for the coming years.
Key Takeaways from Savills’ Analysis:
- Improved Market Sentiment: The UK property market is performing better than anticipated.
- Upgraded Short-Term Forecast: Savills has revised its short-term price growth forecast upwards.
- Positive Long-Term Outlook: The long-term growth forecast looks increasingly favourable.
- Short-Term Volatility: Monthly fluctuations may occur due to mortgage rate volatility.
Why Has the Market Outperformed Expectations?
Nationwide’s latest price report reveals a marginal 1.1% increase in UK housing prices for 2024. This growth is attributed to lower mortgage rates, with long-term fixed rates falling below the Bank of England’s base rate of 5.25%. This trend has bolstered buyer confidence and led to more flexible lending criteria from lenders, pushing mortgage approvals above 60,000 for the first time since September 2022.
Factors Driving Short-Term House Price Projections
The resurgence of positive sentiment in the UK property market is largely due to controlled inflation. Headline inflation has decreased to 3.2%, down from 11.2% at the end of 2022. This reduction in inflation makes future interest rate cuts more plausible, enhancing affordability for buyers. Consequently, Savills predicts a 2.5% price increase across the board for 2024.
Long-Term Price Projections
Savills has increased its five-year property growth forecast to 21.6%, with significant regional variations. The North West, including Manchester, is expected to see the highest growth at 28.8%, substantially outpacing London. This growth is driven by an improved economic outlook, with Oxford Economics forecasting GDP growth of 8.9% and wage growth of 16.4% over the next five years. Additionally, interest rates are projected to drop, making borrowing cheaper and increasing affordability for buyers and investors.
Monthly Price Fluctuations
Savills notes that political events, particularly general elections, can cause short-term economic volatility, impacting house prices. However, the overall long-term outlook remains strong.
Investment Insights
For property investors, the economic forecasts are promising, especially in the North West, which offers higher potential for growth and yields. While high interest rates currently reduce profitability, opting for off-plan properties can be a strategic move. With interest rates expected to fall to around 3% by 2026, investors can save significantly on mortgage costs, enhancing returns on investment.
Conclusion
The UK property market is showing signs of recovery with a positive outlook for 2024 and beyond. Investors should focus on high-growth areas like the North West to maximize returns, and consider off-plan properties to benefit from future interest rate reductions.
Find out how Portico Invest can kickstart your investment!
Sources
- Nationwide House Price Index
- Savills UK Revised Mainstream House Price Forecasts: 2024–2028
