As we step further into 2024 the question on many minds is whether this year presents a favourable opportunity to delve into the world of property investment. With the UK housing market recently undergoing significant shifts, marked by dramatic fluctuations in house prices and consecutive adjustments in interest rates, the decision to buy property has become an increasingly intricate puzzle.
In this blog post, we’ll delve into the current situation, covering the most recent housing price projects and the rental market.
House Prices Falling at Considerable Rate
The UK housing market is experiencing a significant downturn, with recent data showing the fastest annual decline in house prices in 14 years. This drop is attributed to higher interest rates, making it harder for people to buy homes with mortgages.
A recent Nationwide report reveals a substantial year-on-year decrease of 3.8% – the sharpest since the 2009 global financial crisis – in contrast to a 3.5% decline in June.
The average UK home price is now £260,828, down 4.5% from the peak in August last year. July saw a slight 0.2% price dip from the previous month according to RWinvest in the UK.
The Bank of England’s 13 consecutive interest rate hikes since December 2021 to combat inflation are a primary cause. Another rate hike in August, from 5% to 5.25%, adds to the constraints on the housing market, reflecting the bank’s commitment to fighting inflation.
So, what does this mean for property investors?
If you are stepping into the market, you’re going to find properties below their typical market value. If you already own properties and are planning to sell, you may want to wait until prices return to previous highs. According to Savills, house prices are likely to rise by 6.2% by 2026. As such, a long-term investment strategy could lead to substantial capital growth especially with the increasing UK population figures.
Property Demand and Rental Costs at an All-Time High
If you’re a buy-to-let investor, you’re in luck.
Since 2022, the demand for rental properties has risen by 23%. Rental enquiries soared by 46%. While housing stock has fallen by 38% compared to the national five-year average. Moreover, renters are more likely to agree to tenancies before viewing properties – bidding wars to secure homes have also become more prevalent. Why not view our dedicated area on architecture or our interior design ideas.
As such, property demand has sent rental costs rocketing upwards. Homelet puts UK rent prices at £1,299 PC on average. This figure has never been seen before in the housing market. As such, new investors may be able to achieve substantial rental yields more than they would have done if they purchase property when the market recovers. More UK specific statistics can be viewed on the Statista resource as well as the UK interest rates chart.
Off-Plan Purchasing for Greater Capital Appreciation
If you are new to property investment, you may be unaware of off-plan purchasing.
Essentially, off-plan properties are bought directly from the developer’s blueprint as a strategy before they have been built. The developer requires capital to complete the construction and thus offers units to investors at a discount – typically around 5% or 10% below market. Investors can save tens of thousands on off-plan properties, which will rise in price as they approach completion.
Then, investors can either sell up for a tidy profit or rent out a tenant-ready property and enjoy the benefits of a regular rental income. In addition, investors can also rest easy knowing the property will meet the government’s new EPC criteria.
If you purchase an off-plan property now, you may find the price rises even more sharply according to the Savills predicted figures, more so than if you’d invested earlier.
Final Thoughts
In conclusion, the decision to invest in property in 2024 stands at a crossroads of opportunities shaped by fluctuating market conditions. The decline in house prices offers a chance for astute investors to enter the market at a favourable juncture, with the potential for substantial returns over time. It is worth noting that studies by companies like Britannia estate agents highlight the interest in overseas property investments too.
The buoyant rental landscape further fuels this prospect, underpinned by shifting tenant preferences and supply limitations. For those inclined towards innovation, off-plan purchasing promises a dual advantage of discounted acquisition and future appreciation.
