Real estate market stability indicated by leveled house prices, yet experts predict further increases ahead
The UK housing market is expected to grow modestly in 2024, according to recent forecasts. The Office for Budget Responsibility (OBR) projects that UK average house prices will be around £265,000 by late 2024, with a growth rate of approximately 2.8% in 2025.
Amanda Bryden, head of mortgages at Halifax, has stated that average house prices have largely plateaued in the early part of 2024. However, she expects property prices to rise modestly over the course of the year.
The current forecast for UK house prices in 2024 expects some softening due to higher interest rates, but potential future interest rate drops could support moderate price increases. If downward moves in Bank rate come into play later this year, fixed mortgage rates should fall, according to Bryden.
Regional variations are significant, with faster growth in areas like Northern Ireland and the North East, and slower growth in parts of England such as the South West.
Interest rates have recently been high, which has weighed on demand. However, there are expectations that the Bank of England will reduce rates gradually if inflation eases further, potentially making mortgages more affordable. This could mildly stimulate demand and house price growth over the next quarters.
The commercial real estate market values properties based on factors like physical condition, location, and age, with well-maintained, modern properties commanding higher prices. In the current market, the emphasis is on location and quality over the yield on debt or cost.
The sector also anticipates growth in non-traditional market segments like aged care facilities, student housing, data centers, and life sciences real estate. Rent values have seen sustained growth, positioning real estate as reasonably valued in comparison to gilts and presenting growth potential.
Opportunistic acquisitions of prime properties in prime locations are anticipated. However, stimulus measures, such as a stamp duty holiday or reprieve, may be implemented, but they could potentially create unnecessary market froth.
The housing market is expected to be a key issue in this year's election, with all parties likely to prioritize it. Daniel Austin, CEO and co-founder at ASK Partners, has expressed concern about the UK housing crisis and called for the next government to prioritize it.
Eased planning regulations for brownfield sites and conversions are expected to be popular among developers. A long-term plan for new homes, including social housing, is anticipated, but short-term fixes are also expected.
The UK's biggest mortgage lender, Halifax, has found that average house prices rose by 0.1% in April after falling 0.9% in March. The current average cost of a typical UK home is £288,949, slightly up compared to £288,781 last month.
In summary, the UK housing market is expected to grow modestly in 2024, with some softening due to higher interest rates. Prime property prices are expected to pause in 2024 but rebound later. Potential future drops in Bank of England interest rates could ease mortgage costs and support demand, leading to moderate house price growth. Regional differences remain considerable. The housing market emphasizes the importance of location and quality over the yield on debt or cost, and the sector anticipates growth in non-traditional market segments. The market is expected to be a key issue in this year's election, with all parties likely to prioritize it.
Business investors in the UK real-estate market might find opportunities in the anticipated growth of non-traditional market segments like aged care facilities, student housing, data centers, and life sciences real estate, as these sectors are projected to experience sustained rent values and growth potential.
If the Bank of England reduces interest rates gradually, as some experts anticipate if inflation eases further, this could make mortgages more affordable, stimulating demand and house price growth, especially in prime locations, over the next quarters.
