The UK economy has endured challenges in recent years, but it is now back on track and the future looks much bright.
Throughout the cost of living crisis, global energy troubles, rising inflation and high interest rates, property remained resilient. While house prices did slightly drop in the last 18 months, overall the market stayed strong and property owners are now seeing the benefits.
Property values are rising again with the economy. What trends are coming over the rest of 2024 and how will they impact property?
Residential property market leads the way
Residential property will continue to perform well and play a major role in the UK's economic recovery. The fundamental facts of the market are that there is a huge demand for homes and nowhere near enough supply.
The new government has targeted 370,000 new homes a year to try and fill that gap, but in the last full year on record just 230,000 were built.
Bridging that gap between reality and target will be extremely difficult, and possibly not enough. The Centre for Cities esimates that there is a shortfall of 4.3 million homes at present. To meet that demand, we would need to build approximately 650,000 new homes a year until the end of the decade.
That means competition for homes will keep increasing, pushing both house prices and rents up. The imbalance between supply and demand is going nowhere, meaning that the property market will continue to be a major economic pillar for the UK.
Commercial property
The other side of the property market is commercial. That includes retail, industrial, logistics and office properties.
All of those sectors took a big hit during the Covid-19 pandemic and they are now in the process of recovering. However, the signs are positive and it makes sense that an improved commercial property market would go hand-in-hand with a healthier economy.
Within the market, the main commercial property trend of 2024 is a 'flight to quality' where businesses are increasingly choosing higher specification, more sustainable properties.
Another important economic trend is the continuing rise of e-commerce. That is leading to increased interest in regional warehouse storage properties from companies who need to have distribution centres across the country. In turn, that offers a boost to regional economies which creates jobs.
GDP recovery
GDP growth is back on track after the economic problems in 2023. The latest report from the Office for National Statistics shows growth of 0.4% in May following the new government taking office.
Worries of a recession under the previous Conservative government has receded as the country returned to something more normal after Labour's election victory.
KPMG is one of many analysts saying that the Uk has turned a corner. 0.6% economic growth to date this year will be followed by 0.9% growth again next year according to the agency's July 2024 forecast.
They also note that the unemployment rate is down and confidence in the UK economy is back. Long awaited public sector payrises are matching wage growth in the private sector and setting the economy of a brighter path.
Inflation
Inflation has been a major trend in the UK for at least two years. Following the energy crisis, inflation took off and peaked at over 10% at its worst point.
That led to interest rates going up and had major effects across the economy.
Now, inflation has returned to approximately 2% in 2024 and the Bank of England has begun to cut the base rate of interest from its 5.25% peak.
Inflation is expected to remain stable over the coming months and years, leading to further cuts in the base rate. By the end of 2026, analysts expect it to settle around 3%.
The reduced interest rate is already making mortgages more affordable. Nationwide's sub-4% mortgage is likely to become more common over the next year as interest rates fall and other lenders try to match it.
In turn, anyone buying property or remortgaging and existing property will be able to benefit from cheaper rates and get more for their money.
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