New Snapshot Paints Positive Picture of UK Housing Market

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Latest Savills Update Gives a Telling Rundown of the UK Property Market

While 2023 was a subdued time for property investment, the latest Savills UK Housing Market Update paints a more optimistic view of the national property sector.

Today, we’ll look at the update in more detail and see what it says about property investment in the early months of 2024.

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Annual Price Growth & Interest Rate Anticipation

Savills starts its report by analysing the recent Nationwide House Price Index. In February, there was a 0.7% increase in house prices, bringing the annual growth rate to 1.2%, as reported by Nationwide.

Savills points out that this marks the first instance of positive annual growth since January 2023, attributing it to heightened market activity spurred by increased demand at the beginning of the year.

Additionally, Savills delves into the timing of anticipated interest rate reductions.

The Bank of England (BoE) is still managing the challenge of controlling inflation while dealing with slow economic growth. According to the ONS, the UK entered a technical recession by the end of 2023, as reported by the ONS, despite wages growing faster than inflation. These opposing stories have postponed the anticipated timing for the initial base rate reduction. Oxford Economics forecasts the first rate cut to occur in June, with two more cuts likely later in 2024.

As a result, we may see more buy-to-let investors choosing to enter the market towards the end of the year once those rate cuts come into play.

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Mortgage Rates Positively Influencing Buyer Activity

Savills observes that mortgage lenders are exercising greater caution due to economic uncertainty. Many have raised their rates after significant cuts earlier in the year when they had anticipated earlier base rate reductions.

According to this report, prolonging these rate cuts will keep rates elevated for an extended period, moderating demand growth and alleviating upward pressure on prices. However, it’s noteworthy that mortgage rates are substantially lower than last summer, indicating the property market’s gradual recovery.

Buyers have seized opportunities from previous mortgage rate declines, driving market activity. According to the Bank of England, mortgage approvals in January rose to 55,200, the highest in 15 months. This uptick supported a surge in agreed sales, which were 27% higher in February compared to the same period last year and surpassed the 2017-19 average by 13%, as reported by TwentyCI.

Rental Growth High in Northern Regions

Savills noted that rental growth across the UK dipped to 7.8% in January, down from 8.2% in the previous year, according to Zoopla. Scotland remains the sole region with annual growth exceeding 10%, attributed to rent control policies reducing supply and pushing newly agreed rents upward. Above-average rental growth was also observed in other northern regions, with the North East at 9.9% and the North West at 9.8%.

For this reason, buy-to-let investors may look to cities like Liverpool, Manchester or Newcastle in search of solid returns.

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Author

Dale Barham

Dale is a property content writer at RWinvest. Keeping a close eye on the UK property market, Dale helps our readers stay informed and up to date on the latest market news and statistics.