UK Property Market Catalysts for 2024

Date Published: 6 December 2023

No one knows how hard the property wind will blow and from which direction but there are possible breaks in the storm next year to consider.

These are potentially moments of change when buyers emerge from hibernation to access their accommodation for the year ahead.

Rental renewals

After interest rates skyrocketed, post the mini budget fiasco, many found that the home that was just within their grasp, wasn’t affordable anymore.

This left many to turn back to rented accommodation, boasting demand at a time when landlords were struggling to keep up with their existing mortgage payments.

Rental increases cushioned some of the impact but landlords who’d over extended, faced with a loss-making investment, opted out, reducing supply and thus further increasing prices.

When wannabe buyers are faced with the prospect of renewing their rental contract at an even higher rate, some may reconsider buying if property prices have adjusted to a more manageable level. Lenders continue to trim rates and the purchase is for the mid to long term.

Despite increased affordability issues, according to Zoopla, the movers and shakers of 2023 were cash and first time buyers.

Many of these may well have had help from the bank of mum and dad, but they were the most eager buyers to step up and get off the rental merry go round and where possible, bag a bargain.

At present, rents may be more affordable than mortgages in some areas but for Londoners, high rents are driving them out of the capital into suburbia – a move that most reserve for later on in their lives.

Given cities attract the young, these worker bees who work longer, harder and earn less and now commuting further, may choose to buy if prices have adjusted enough to be within reach.

Deposits into high interest rates

For many who realised they couldn’t now afford a home or wanted to see how far prices would fall over the course of 2023, they potentially deposited what would have served as a household deposit into a savings account with a high interest rate.

If we look at the Bank of England’s Money and Credit report we can see spikes in deposit activity. For those who abstained for a year, come March/April any locked away money will once more become available.

Some will reinvest but others may look at house prices and current rates and make a move. Another peak will come around election time in September 2024.

A record £7.7 billion money was transferred into high savings accounts in Treasury-backed banks in 2023.

If some of this money was tied up for a year, there’s a possibility some may want their money available, post-election for a move.

Momentum will increase through 2025 making some prefer to move when there is less competition, if they can.

Rates creeping down

A decade of cheap money has ended. Leaving in its wake a giant inflated balloon and an affordability crisis.

In response, the bank of England hiked up Table Mountain for 22 months and is now taking a breather at 5.25%.

This has left interest rates at record levels, reducing property transactions by 17% when compared to September 2022 and 1% lower than August 2023.

To entice buyers back to borrowing, lenders have trimmed, not cut, rates. For many this still isn’t enough but for others any movement downward is encouraging.

The rationale being if they can afford to ride out the next year or two with higher rates, there is hope on the horizon of more manageable rates at around 3.5-4% ahead.

This alongside existing house price drops could provide further motivation for those with a decent sized deposit.

Source: Property Notify