We are into the final quarter of 2023 and the UK property market news can be grouped in two distinct sections. The first is regarding property values which continue to struggle as mortgage rates stay high and the cost of living crisis goes on.
The latest figures from the Nationwide House Price Index show a 5.3% year-on-year fall in the average UK house price, with drops recorded in all regions.
The Bank of England has been raising interest rates all year and this has been reflected in the mortgage markets. Rates are higher than they have been for decades and many people are put off moving because of this. In turn, house prices are falling as there are less buyers – and therefore competition – in the market.
Robert Gardner, Nationwide’s chief economist, said: “This relatively subdued picture is not surprising given the more challenging picture for housing affordability. For example, someone earning an average income and purchasing the typical first-time buyer home with a 20% deposit would spend 38% of their take home pay on their monthly mortgage payment – well above the long-run average of 29%.”
However, the latest move from the Bank of England was a surprising freeze in the base rate of interest rather than another rise. Could this pause push long-term interest rates down and ease mortgage rates? We will see in the future.
In the meantime, UK off-plan property continues to look more and more attractive. Buying off-plan now means that you can secure a low price now and beat the mortgage price rises – the best of both worlds.
The second type of property news in the UK concerns the rental market. In contrast to property values, rents are rising fast and the growth shows no sign of slowing down.
The latest Quarterly Rental Tracker from Rightmove shows that the average UK rent has now gone up for the 15th consecutive month. More people than ever in the private rented sector combined with low levels of available supply has pushed rents 10% higher year-on-year outside London to a total of £1,278 pcm. In the capital, rents are up 12.1% year-on-year to an average of £2,627 pcm.
The high demand is shown by the fact that enquiries per property have more than tripled to 25 since 2019. 41% more tenants are looking to move and 35% fewer properties are available than the pre-pandemic average.
All of this is in spite of the number of new rental properties coming to market increasing by 7% over the last 12 months.
But where should you invest for the best rents? Data from Zoopla shows that the big regional cities like Manchester and Birmingham continue to perform extremely well. What’s more, all indications are that this will be the case for a long time to come.
Zoopla notes that rental growth is on track to end the year at approximately 150% of wage growth, and that this will continue in 2024. Next year, it is anticipated that the average UK rental growth will be at least a further 5-6% with regional cities posting numbers much higher than that.
Properties of particular interest to landlords should include larger two- or three-bedroom properties as more people are forced to co-habit by rising costs. Choosing this type of property in the most desirable city centre markets is a good way to expand a portfolio to meet developing trends.
Want to learn more about the UK property market and find out about our latest off-plan property opportunities? Get in touch with the Alliance Investments team today by clicking here >>