In the ever-shifting landscape of the UK property market, Knight Frank's January 2024 report brings promising updates. As interest rate expectations transform, driven by unexpected drops in inflation, the housing market witnesses significant shifts.
In October, markets predicted a minimal interest rate cut. Fast forward to January, and the outlook now anticipates a substantial five cuts, triggered by inflation's rapid decline. Mortgage lenders respond with rate reductions, fostering a positive environment for property investments.
Buoyed by lower mortgage rates and increased demand, Knight Frank revises its UK house price forecasts. Predictions shift from an anticipated 4% decline in October to a positive 3% growth in 2024. The cumulative projection for the next five years signals a promising 20.5% growth by 2028.
Halifax and Nationwide data indicate a turning point, with a notable 1.7% increase in 2023, countering the prior 5% decline. With housing transactions below the average, the market waits for a clear pattern, and signs now suggest prices are stabilising.
While the mainstream London market forecasts a slightly lower growth of 2%, affordability constraints propel lower-value areas to likely outperform. Prime country house markets expect a narrower decline of 2%, shifting from the pandemic-induced highs. Prime London markets, specifically Prime Central London (PCL) and Prime Outer London (POL), may underperform the wider UK market but are poised for growth in the coming years.
The timing of the general election becomes a pivotal factor influencing market momentum. Speculation over potential tax cuts and measures to aid first-time buyers adds complexity, with the housing market susceptible to sentiment shifts based on political developments.
Knight Frank maintains rental value growth forecasts, anticipating a 5.5% rise in PCL and a 4.5% increase in POL. While supply recovers, rising mortgage costs and legislative changes may maintain upward pressure on rents. Despite these challenges, the forecasted growth in 2024 outshines previous records, emphasising the resilience of the UK rental market.
In conclusion, Knight Frank's January 2024 report paints a more optimistic picture for the UK property market, emphasising the role of evolving interest rates, market resilience, and regional dynamics in shaping the trajectory of real estate investments.
