UK house prices to rise 3% in 2024

Economic impact

Within the last three months, interest rate expectations have undergone a seismic shift. In October, financial markets projected a single 25 basis points interest rate cut by the end of 2024 – last week, this changed to an expected five.

Currently at 3.9%, UK inflation has experienced a significant decline from January’s 10.1%, as energy, food and other costs have eased. The accelerating fall in inflation has prompted mortgage lenders to substantially reduce rates, a response aimed at attracting business in a market characterized by lower volume.

Market performance

While UK housing transactions lagged a fifth below the five-year average last year, November witnessed a noteworthy 10% increase in mortgage approvals compared to the previous year. Knight Frank anticipates a double-digit percentage rise in sales volumes for the current year, compared to 2023.

Political impact

The looming General Election introduces a potential challenge to the momentum in house prices. The ideological divide in the Conservative Party threatens Prime Minister Rishi Sunak’s ability to fully control the elections timing – this adds a level of uncertainty to the landscape.

With a Labour election victory remaining the most likely outcome, it’s important to consider the party’s policies that could potentially impact the property markets. Proposals include an overhaul of the non-dom tax regime, an increase in the stamp duty surcharge for overseas buyers, adding VAT to school fees and adjustments to rules regarding inheritance tax.

Beyond domestic political factors, external influences such as the ongoing conflict in the Red Sea pose additional risks for higher UK inflation. The pre-election fiscal measures in the March Budget, including potential tax cuts and initiatives to assist first-time buyers, could further stimulate market activity.

Targetfollow

Despite market shifts, Knight Frank maintains a 5% growth forecast for rents in 2024. Rising mortgage costs, taxes and regulatory changes, such as the Renters Reform Bill, are expected to sustain upward pressure on rents.

As we navigate these changes, Targetfollow remains committed to staying at the forefront of these market dynamics – providing unparalleled insights and strategic solutions for our stakeholders. We stand ready to leverage these insights, ensuring we remain at the forefront of market trends and continue to offer strategic solutions in this evolving environment.

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