Could 2024 be the ideal time for property investors to enter the market? As we approach the new year, it’s important to take a balanced look at the current state of the market. Despite recent challenges, there are opportunities for investors to consider.
First, let’s look at average house prices. According to the Government’s UK House Price Index Summary, the average price of a UK property in November 2022 was £294,910, with a 10.3% annual change. However, as of now, the average house price is £259,557, with a -2.0% annual change. This decline is due to factors such as rising mortgage interest rates and the cost of living crisis. Experts predict that house prices will remain stable, with growth expected to be between -2% and 0%. This presents a chance for investors to secure competitive deals at lower prices.
Rising rents have also been a significant trend over the past 18 months. Demand for rental properties has consistently exceeded supply, leading to rent increases. While the imbalance has started to ease, rental prices remain high. Annual rental price growth is currently at 10.5%, down from 12.1% a year ago. Rental supply has increased by 20% compared to last year but remains 30% below the average for this time of year. Experts predict that rental growth will continue in 2024, with a projected increase of 5-6%.
In terms of rental yields, the average rental yield for buy-to-let properties is 5.3%, according to research from Benham and Reeves. This figure has increased from 4.8% in the previous month. With house prices expected to stabilize and rents continuing to rise, investors can focus on the right property types and regions to achieve highly competitive yields.
The outlook for mortgage interest rates in 2024 is positive. While there may be uncertainty regarding a possible decrease in the Base Rate, this is unlikely to impact mortgage rates. Mortgage rates are more closely linked to SWAP rates, which follow money market confidence and wider economic activity. As a result, mortgage rates are expected to gradually decrease.
In summary, 2024 presents a favorable landscape for property investors. Stable house prices, strong rental demand, rising rents, and potentially lower mortgage interest rates create ideal conditions for investment. While legislative battles may continue, recent developments indicate a government responsiveness to landlord concerns.