It has been a while since we checked in on the latest news from the UK property market.
Therefore, let's have a look at the trends relating to property prices, rental yields, mortgage rates and more for 2024 thus far.
Main headlines within the market overall are summarised below:
UK Property Market Snapshot - April 2024
Overall:
Cautious optimism: The market shows signs of recovery with increased buyer activity, but economic uncertainties and high interest rates temper enthusiasm.
Price Moderation: Despite some regional variations, average house prices are expected to rise by 3% in 2024, a shift from the downward trend seen in late 2023.
Regional Disparity: London's market might cool slightly, while cities in the North and Midlands could experience higher growth due to job creation and infrastructure projects.
Demand & Supply:
Demand: Rental demand remains high, particularly for smaller properties and in specific locations. First-time buyer challenges and limited new build for rentals contribute to this.
Supply: The new build rate for rental properties hasn't kept pace with demand, potentially leading to higher occupancy rates for existing investments.
Investor Considerations:
Buy-to-Let: Can still be a viable option, but requires careful research and planning. Focus on areas with strong rental yields, job growth, and limited rental stock.
Impact of PropTech: Technological advancements like virtual tours and AI-powered property management can streamline investment processes.
Positive Signs:
Easing Mortgage Rates: While still high, mortgage rates have shown a slight decrease compared to late 2023.
Government Initiatives: Schemes like Help to Buy continue to support first-time buyers, potentially boosting overall market activity.
Challenges:
Higher Mortgage Rates: Increased borrowing costs impact affordability and potential rental yields for buy-to-let investments.
Record-Breaking Renovation Costs: Rising material and labor costs pose challenges for property refurbishment projects.
Investment from overseas:
Levels of interest remain high with investors keen to discuss overall strategies that aim to achieve a competitive yield alongside scope for capital growth.
Positive Market Outlook:
Market Growth: The UK property market is expected to see a 3% price rise in 2024, driven by economic recovery, wage growth, and lower unemployment.Investor Confidence: This positive outlook attracts investors, especially outside London.
Regional Opportunities: While London might see a moderate 2% growth, cities like Manchester, Birmingham, and others in the North and Midlands could see higher gains.
Benefits for Expatriates:
Weakened Pound: The relatively weak pound makes UK property more affordable for foreign investors.
Rental Yields: Despite rising property prices, rental demand remains strong, offering potential rental income for buy-to-let investments.
Long-Term Investment: The UK property market is known for its stability and long-term growth potential.
Challenges to Consider:
Mortgage Rates: While slightly lower than late 2023, mortgage rates remain higher than historical averages, affecting affordability.
Non-Resident Taxes: Expatriates might face additional taxes like the Annual Tax on Enveloped Dwellings (ATED) for properties held in limited companies (500k and above).
UK city hotspots:
Lets have a look at the top contenders for capital growth as we move towards the summer months.
Who's hot and why?
Northern Powerhouse Cities:
Manchester: Strong job market, high rental yields, and ongoing regeneration projects like Northern Powerhouse Rail and MediaCityUK could contribute to capital growth.
Leeds & Liverpool: Similar factors to Manchester, coupled with infrastructural developments potentially boosting connectivity and property appeal.
Midlands Engine Cities:
Birmingham: Extensive regeneration projects, diverse economy, and HS2 arrival position Birmingham as a competitive investment destination.
Nottingham & Leicester: Growing student populations, infrastructure upgrades, and affordable property prices compared to London make them attractive options.
Other Potential Growth Cities:
Oxford & Cambridge: Strong presence of universities and continued high demand for student accommodation could lead to capital growth in these cities.
Bristol: Lifestyle appeal, thriving tech sector, and limited housing supply contribute to Bristol's potential for capital appreciation
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Important Considerations:
Market fluctuations: The property market can be dynamic, and unforeseen economic events can impact capital growth projections.
Location specifics: Growth potential can vary greatly within cities. Research specific neighborhoods based on factors like regeneration plans, rental demand and transport links.
UK buy to-let mortgage rates;
The UK mortgage market has certainly steadied since the variances of late 2022 and 2023. This said, rates are yet to start falling as predicted although inflation figures have reduced over the first quarter of 2024. Experts are now predicting first rate reductions at the end of Quarter 2.
Expect Rates to Remain Elevated: Don't anticipate a significant drop in buy-to-let mortgage rates compared to March 2024. Rates are likely to stay above historical averages due to:
Bank of England Base Rate: While the Bank of England held rates at 5.25% in February, a cut later in 2024 might not significantly impact buy-to-let rates immediately.
Increased Costs for Lenders: Lenders themselves face higher borrowing costs, which can influence the rates they offer to borrowers.
Rate Variations: Specific buy-to-let mortgage rates will depend on several factors:Loan-to-Value Ratio (LTV): Lower LTV (higher down payment) typically leads to better rates.
Mortgage Product: Fixed-rate deals offer stability, while tracker rates can be more volatile but may offer lower initial rates.
Buy-to-Let Specialist Lender: Some lenders cater specifically to buy-to-let investors and might offer competitive rates.
Here's a suggested range for buy-to-let mortgage rates in Q2 2024 (based on 2024 trends):
Fixed-rate mortgages: 4.50% - 6.00% (depending on LTV and product features).#
Tracker rates: Potentially lower initial rates, but could adjust based on Bank of England base rate changes.
