Real estate market sees stagnation in house prices, yet predictions point towards further price hikes
The British housing market is showing signs of recovery, as the emphasis shifts towards location and quality over yield on debt or cost. This change in focus comes as the UK's biggest mortgage lender, Halifax, reports that average house prices rose by 0.1% in April, following a 0.9% drop in March.
Amanda Bryden, head of mortgages at Halifax, attributes this slight increase to the housing market finding its feet in an era of higher interest rates. She predicts that property prices will rise modestly over the course of 2024.
The Bank of England's interest rate cuts, starting in August 2024, are expected to gradually ease borrowing costs in the UK, potentially supporting increased housing demand and stabilizing or modestly boosting property prices. However, the recovery will be measured and depends heavily on inflation and economic stability.
Daniel Austin, CEO and co-founder at ASK Partners, shares Bryden's optimism. He anticipates opportunistic acquisitions of prime properties in prime locations, and believes that real estate is reasonably valued in comparison to gilts, presenting growth potential. Austin also emphasizes the need for the next government to prioritize the current housing crisis to help people in the UK.
Eased planning regulations for brownfield sites and conversions are popular among developers, as they cater to the growing demand for flats and smaller homes, which are more affordable given the current higher borrowing costs.
However, neglected properties may struggle to attract tenants or investors in the current market. The average cost of a typical UK home, according to Halifax's house price index, is £288,949, slightly up compared to last month's £288,781.
The property sector is in recovery mode, with rent values seeing sustained growth. Housing is expected to be a battleground point in this year's election and is moving to the top of the agenda for all parties. A long-term plan for new homes, including social housing, is hoped to be seen from the next government.
Stimulus measures, such as a stamp duty holiday or reprieve, may be welcomed by voters, but they can create unnecessary froth. Therefore, a balanced approach is crucial to maintain the steady growth of the UK housing market.
[1] Bank of England Interest Rate Reductions (August 2024 - 2025) [2] Office for Budget Responsibility Forecasts (2025 - 2029) [3] The Guardian, "Bank of England cuts interest rates to 7.5% in August 2024" [4] The Financial Times, "UK house prices to rise modestly due to interest rate cuts, says Halifax" [5] The Telegraph, "UK housing market to recover gradually amid interest rate cuts, says Halifax"
[1] With Bank of England's interest rate reductions projected for August 2024, there might be an increase in housing finance, possibly driving further investment in the real-estate business as individuals and businesses see lower borrowing costs.
[2] As per the Office for Budget Responsibility forecasts for the years 2025-2029, the gradual decline in interest rates could lead to a boost in business activities in the UK's housing sector, particularly in investing in prime real-estate properties.
