What will happen to property in 2024?
Explore the anticipated developments in the property market for the year 2024
The rate of inflation and the Bank of England base interest rate are the two most important indicators as to how the property market as a whole will perform.
Meanwhile, employment levels and wage growth are particularly significant for the rental market, as rental prices tend to track income and affordability.
The good news is that, in the main, the economy is on the up even though the figures for each quarter can fluctuate. On average, the forecasts versus this year’s figures are:
Economic measures
2023
2024 forecast
GDP
0.60%
0.70%
Unemployment
4.20%
4.60%
Wages
7.20%
3.80%
Inflation
7.50%
3.60%
Bank base rates
5.25%
5.1-5.2%
So, while the experts believe wage growth and employment levels may dip next year, the outlook for the broader economy is positive.
GDP should continue to slowly recover; the rate of inflation is expected to more than halve and the base rate should begin to come down.
Of all the economic forecasters, Capital Economics has been one of the more consistently accurate in the past for inflation and base rate forecasts, and they are more bullish about how they expect the economy to perform over the next couple of years.
Rise
Fall
Remain stable
They’re predicting that by the end of 2024, inflation will fall to 2.4% and the base rate will drop to 4.75%. And by the end of 2025, their forecast is that inflation will be at 1.3% and the bank rate three per cent.
Against that picture, we expect average mortgage rates to be around four to five per cent – around one per cent lower than they are currently.
Given that the widespread predictions of a 10% drop in prices in 2023 didn’t materialise, and with things looking up for the economy, the forecasts for 2024 are more circumspect.
Average prices are predicted to keep falling, but not by very much, and transaction numbers are expected to pick up. ‘Normal’ demand levels will only return when the base rate falls back to around four per cent.
Property market measures
Property prices
-0.10%
-4.7 to -2.0%
Transactions (mn)
1
1-1.04
When you take into account that some property values have increased by as much as a third in the last three years alone, these relatively small falls shouldn’t have much effect on those that have owned their properties since before the pandemic.
And the four to five-year forecasts are for strong growth to return, although it’s important to note that they are mostly below inflation rises.
For those that own a property with 100% cash, it’s worth running the numbers over the next few years to check your investment will grow at least in line with inflation – or, ideally, rise above it.
Property Price Forecasters
Savills (Nov 23)
Hamptons (Sep 23)
JLL (Nov 23)
2024
5 yr compound growth
4 yr forecast
5 yr cumulative
UK
-3.0%
17.9%
14.0%
London
-4.0%
13.9%
-2.5%
11.5%
-2.0%
16.3%
South East
-3.5%
16.7%
9.5%
South West
5.5%
East of England
9.0%
East Midlands
19.6%
5.0%
West Midlands
20.2%
4.0%
North East
-1.5%
21.4%
-0.5%
8.5%
North West
1.5%
Yorks & Humber
Wales
0.0%
Scotland
3.0%
However, these blanket averages are really not that useful when it comes to your own individual properties.
For instance, houses have seen much better growth than flats for some time now, so any ‘average’ that doesn’t take this into account should really be ignored.
The reality is, as a landlord, you need to check whether your individual property investments are actually delivering real investment returns rather than ‘nominal’ growth.
If the value of your properties isn’t rising on average by more than three per cent a year and you don’t have a mortgage, you may actually lose money over time, particularly when you take into account buying and selling costs and the tax you pay.
In November, the Chancellor announced the contents of the Government’s Autumn Statement.
Landlords and agents had been hoping for a review of both the purchase tax on additional properties and mortgage interest relief, to improve returns and encourage much-needed investment in the private rental market.
But there was virtually nothing to help the property market directly.
Two small positive announcements were:
The Mortgage Guarantee Scheme, which supports 95% LTVs, has been extended and will now remain open for applications until the end of June 2025. This should help first-time buyers and those with low deposits buy homes and keep the market moving.
The Government intends to allow houses to be turned into two flats via permitted development. Although a consultation needs to take place and more information is required, this is potentially good news for investors.
But the main boost for the property market comes indirectly from increased government support for those on the lowest wages, From April 2024:
Local Housing Allowance, which has been frozen since 2019, will be increased to cover the lowest 30% of local rents. That will give around 1.6 million households an average of £800 a year in extra support
Benefits in England and Wales will go up by 6.7%
The National Minimum Wage will rise from £10.42 to £11.44 an hour for those aged 21 and over
And all workers should see a slight improvement in their take-home pay, as a result of cuts to National Insurance:
Employed NI costs are reducing from 12% to 10%
For self-employed people, which includes landlords:
Class 2 NI is being scrapped, saving tax payers £3.45 a week
The cost of Class 4 contributions will drop from nine per cent to eight per cent
All these changes should give people a little more money in their pocket and help tenants, particularly those receiving benefits, to afford their rent, reducing the chance of landlords having to deal with arrears.
Read more on renting to tenants on benefits.
