Whether you are a tenant, landlord or homeowner, 2023 was a turbulent year across the board, with rising rents and mortgages and falling property prices.
To find out whether 2024 will be as turbulent as the year before, we asked five real estate experts for their predictions for the next twelve months. Here are their answers.
1. Rents are rising… but not so fast
Tenants who suffered from the massive 9.4% increase in new rents last year are no doubt hoping that things will look very different in 2024.
Aneisha Beveridge, head of research at Hamptons, says that while there will be a rise over the next 12 months, it will probably be a little slower than we are used to. While that’s not good news, it’s not terrible either.
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“We expect rents to continue to rise in 2024, probably by around 7%. This growth will continue to be driven by a shortage of rental housing combined with higher landlord costs – particularly as more investors cancel cheaper fixed-rate contracts and find themselves forced to take out a new mortgage at higher rates,” she said.
2. The costs will drive tenants out of the cities
Sarah Walker, founder of Lessons in Lettings, predicts that rising rents will cause tenants in larger cities to decide to give up their homes and move away.
“With the cost of living ever increasing, I predict many renters will leave the larger cities altogether as basic financial obligations like rent, bills and groceries will mean they won’t have enough money in their piggy bank to go out and have fun and enjoy all that their local area has to offer.”
3. About 25% of landlords will sell by August
It seems that landlords are just as fed up with the housing market as their tenants.
A recent report by estate agent Lordsons found that 25% of landlords had expressed an intention to sell their properties by August 2024.
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“Factors such as rising mortgage interest rates, falling returns on capital and changes to the capital gains tax exemption are contributing to this development,” it says.
It is likely that the upcoming tenant reform law and increased regulation will further encourage landlords to exit the market.
4. Real estate prices will hit rock bottom this summer
For those lucky enough to secure a property title, the past year has had its ups and downs, so what does 2024 have in store for them?
“With the prospect of interest rate cuts later in the year, we expect the market to bottom out by the summer, although the prospect of a general election pushes the start of a recovery back to 2025,” says Lucian Cook, head of residential property research at Savills.
“Lower mortgage rates and greater economic stability should halt the decline in house prices in 2024,” says Beveridge.
“Household incomes are currently rising faster than inflation, which should improve affordability somewhat and bring more buyers into the market. Based on the ONS House Price Index, we expect price growth of 0% across the UK in the fourth quarter of 2024 and a return to growth in 2025.”
5. Less expensive areas are becoming more popular
“Previously overlooked residential property markets in the commuter belt around London will continue to be in focus as people re-evaluate their work-life balance and find better deals in less well-connected areas. More generally, less expensive parts of the UK will see stronger demand and stronger house price growth as affordability continues to constrain buyers,” says Tom Bill, head of UK residential property research at Knight Frank.
6. The Bank of England will cut interest rates five times
2023 was not a good year for mortgages as interest rates continued to rise and borrowers felt the impact, but the outlook for 2024 is already looking much better.
“In October, financial markets were still expecting a single interest rate cut of 0.25 percent by the end of 2024. At the end of last week, they were already expecting five cuts,” says Bill.
Read more: Why tax cuts in 2024 may not mean you pay less
“The main reason for this change in outlook is that inflation is falling faster than expected. As a result, mortgage lenders have cut their interest rates quite significantly in recent weeks, partly to win business in a low-volume market.”
7. Mortgages with three-year fixed interest rates are becoming more common
And it’s not just mortgage interest rates that are changing – the types of mortgage products borrowers take out will also change.
“Two- and five-year fixed rate options will continue to exist, but I expect the less competitive three-year rates to become more popular and competitive,” Walker says.
“With the Bank of England cutting interest rates, we will see more competitive products across the board, offering more choice and flexibility to prospective homeowners.”
8. The election is unlikely to make waves
Since parliamentary elections must be held before January 2025, the country will almost certainly hold elections this year.
“We don’t expect a major impact on the property market,” says Beveridge. “With the two major political parties fighting for the centre ground, there is less chance of radical changes, which often deter home seekers.”
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“While buyers and sellers may be a little more cautious at the high end of the market, as this is where major tax changes often hit hardest, a better affordability backdrop should result in more moves across the market this year than in 2023.”
9. The March budget will boost the real estate market
While the impact of the election itself is likely to be minimal, the Conservative Party’s pre-election canvassing efforts could be significant.
“Activity could be boosted by the election giveaways in the March budget,” says Bill. “There is speculation about tax cuts as well as measures to support first-time buyers, including longer-term mortgages, smaller deposits and a revived Help to Buy scheme.”
Regard: UK property prices rise, experts predict a ‘quieter year’ for buyers and sellers
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