2024 is coming to an end and it is fair to say that it has been a highly successful year for anyone who owns UK property. Whether you are a homeowner or a buy to let investor, this was the year that property proved its resilience and overcame the struggles of the last 18 months.
As we enter Q4, it is also clear that there is much more to come in the future as we enter a new property cycle. Long-term forecasts for both house prices and rents are positive. Market activity is increasing and confidence is flowing back into the market more and more every day.
UK house prices Q4 2024 review
Housing analysts began the year in a negative mood. Outlets such as Savills, Lloyds, Rightmove and Zoopla all predicted that the average UK house price would fall by as much as 3% over the course of the year.
Following the record high mortgage and interest rates seen in the last few years, this was an understandable prediction.
However, it turned out that UK property was much more resilient than expected. The first half of the year proved to be a turning point for property, and the months since have put any lingering doubts about the health of the market to bed.
The latest figures from the Office for National Statistics show that the average UK house price is up 1.6% over the year so far – which is almost 5% better than the worst predictions from this time in 2023.
What’s more, the pace of growth is increasing. House prices are not only higher, they are growing faster than any time since November 2022. Revised forecasts from Savills show that the best could still be to come. The agency predicts that the average UK house price may rise by as much as 21.6% in the next four years.
Interest rates and borrowing costs falling – 2024 mortgage cost summary
Property values are going up because the overall economic picture is much improved compared to 2022 and 2023. Inflation is back down to approximately 2% from highs of more than 11% in October 2022.
That is the government’s target inflation rate and the reason why the Bank of England has started cutting the base rate of interest again.
The interest rate had previously been held at a high 5.25% rate seven times in a row, but the Bank cut it to 5% in August and retained that lower rate in September.
The rate cut gave an immediate boost to the property market and proved that the tougher economic conditions were coming to an end.
While the rate is still higher than the historic lows seen over the last 15 years, all indications are that it will fall further in the coming months and years.
The Bank’s governor, Andrew Bailey, said this October that they could be “a bit more aggressive” in their approach. This has led to speculation about an even greater cut before the end of this year than the expected 0.25% reduction in either November or December.
For anyone buying property, a further interest rate cut means that borrowing costs are likely to fall again.
Mortgage rates have been falling already in anticipation of more cuts before the end of the year. Lenders are acting ahead of the market to try and gain an edge by offering sub-4% mortgage rates again. Some analysts are even predicting we may see the return of 3.5% rates sooner rather than later.
For comparison, during the toughest moments of 2022 rates as high as 11% were offered by lenders.
With the above in mind, it is clear that this is a great time to buy property. Falling borrowing costs make it more affordable, and the benefits are increased if you buy off-plan property where you can secure today’s price and pay tomorrow’s mortgage rates. In other words, off-plan property for sale now could allow you to benefit at both ends of the transaction.
Property market activity increasing in Q4 2024
Evidence of the effects of the base rate cut and lower mortgage prices can be seen by looking at the increased market activity over the course of 2024.
The Zoopla House Price Index shows that buyers are making the most of the lowest mortgage rates we have seen for 15 months.
Home buyer demand is up 26% annually and sales agreed are up 25%. Many households and investors who have put off buying property over the last two years due to the cost of borrowing are now in the market and spending again.
Analysis from Rightmove adds that the busy Autumn period started early this year thanks to lowered mortgage costs. They go on to add that the September price rise of 0.8% is double what they would normally record in a year.
How much have UK residential rents gone up in 2024?
However, despite the increased market activity, there are still a huge number of people in the rental market for the long-term. The Office for National Statistics estimates that there are 5.4 million households in the Private Rented Sector (PRS) – a number which keeps rising every year as house prices increase.
That creates a huge amount of demand for rental property and is the reason why the average UK rent has gone up 8.5% so far this year despite wage growth being significantly slower.
In some places like Manchester, rental growth is even higher than that. The city centre has tens of thousands of potential renters and nowhere near enough homes for them all, making off-plan Manchester property for sale like Berkeley Square an extremely valuable commodity.
In the future, it is anticipated that the average national rent will keep increasing. According to JLL, residential rents in the UK have the potential to grow as much as 18.8% by the end of 2028.
Is this a good time to invest in UK buy to let property?
UK buy to let property investment is a tried and tested market which has delivered strong returns for many years. The coming years will continue that trend, making this a great time to invest in UK property.
The aforementioned house price and rental growth forecasts show that there is a huge amount of value in the market that investors can tap into.
The simple fact is that there are not enough homes for everyone. The new government has committed to building 1.5 million homes in the next five years, but even if it succeeds it is doubtful whether that will be enough.
The Centre for Cities estimates that there is a shortfall of 4.3 million homes in the UK at present. To fill that, we need to build either 442,000 homes a year for the next 25 years, or 645,000 homes a year for the next decade.
The government’s target is considered ambitious, but it is nowhere near the level that would eliminate the housing shortage. In addition, the target is far in excess of how many homes we actually build each year in reality. For example, just 212,000 homes were completed across the UK in 2022/23.
Add in a “construction workforce crisis,” and it seems like an unprecedented effort will need to be made to hit the housing target – and as stated above, that wouldn’t even be enough to close the housing gap.
That means the housing shortage will continue and the value of available properties will continue to rise. Combine that with more affordable mortgages and you have a recipe for two things. Firstly, house price growth due to the increased competition for homes. Secondly, more people staying in the rental market as house prices increase.
For property investors, that makes 2024 a great year, and points to even more success in 2025 and the years following. This is a good time to be a buy to let property investor.
Want to learn more about the UK property market and how you can invest in the UK’s strongest existing and new markets? Get in touch with our team today to discover the available opportunities.
