The UK’s property investment landscape has been in a constant state of flux over the past couple of years, curtailing the rapid growth in house prices that we witnessed up to and during the pandemic.
The causes of this market slowdown are well known: sky-high inflation and, introduced by the Bank of England to curb rocketing prices, a rising base rate.
Although the BoE has pressed pause on its hiking cycle, the base rate (5.25 per cent) still resides far above the sub-1 per cent levels that property buyers and investors had become accustomed to between 2008 and 2022.
What's more, the recent inflation print – showing that UK inflation had risen again – was a timely reminder that the threat of the cost of living crisis remains.
That said, the economy is in a more stable place than it was 12 months ago, and beneath the surface of these financial headwinds lies a landscape of intriguing investment opportunities that could potentially provide useful returns in the coming months and years.
A window of opportunity is opening
It is now widely accepted that the lending markets have stabilised, with products more accurately adjusted to the higher base rate.
Since the BoE halted its rate hiking cycle in August 2023, analysis by Moneyfacts shows that average fixed rate mortgages have now fallen to a seven-month low, causing many experts to suggest that homebuyers – including first-time buyers – will benefit from a mortgage price war in the mainstream mortgage market in the coming months.
Meanwhile, some specialist lenders have started 2024 by reducing rates across their bridging and buy-to-let mortgage ranges.
More generally, there seems to be more of a willingness to lend as economic conditions improve, which can only be a good thing for landlords, investors, and buyers.
Indeed, with lenders adjusting their products and adding new options to their ranges, there is clearly a drive to reignite the market after a challenging two years – buyer and investor demand ought to pick up thanks to improving rates.
With this in mind, there is cause for optimism as we survey the UK property investment landscape for 2024.
This optimism is prompted by improving data from the leading house price indices. Halifax’s house price index, for example, shows that average UK house prices rose by 1.1 per cent in December 2023 – the third consecutive month of positive growth.
Improving house prices comes amid expectations of base rate cuts by the BoE later this year.
Supporting this, Knight Frank’s forecasts for house prices in the year ahead have recently been adjusted up from a 4 per cent dip to an increase of 3 per cent in 2024. Meanwhile, Savills predict that prices will rise steadily over the next three years to reach 6.5 per cent growth by 2027.
Therefore, some investors will consider the opening months of this year as a good opportunity to re-enter the property market, getting in ahead of the projected growth in the medium to long-term.
