When it comes to UK property investment, you’ll want to keep one eye on rental prices and another on property values.
2023 was a subdued year for the property market due to numerous factors. For one, external events – such as the COVID-19 pandemic, conflict on the continent and the Liz Truss mini-budget – led to higher inflation. In response, the Bank of England raised interest rates 14 times in a row until they settled at 5.25%.
Higher interest rates mean more expensive buy-to-let mortgage costs, which dissuades people from taking out mortgages. As a result, activity slowed down, and more people chose to rent instead of buying properties.
This considerable increase in tenant demand and rising costs associated with buying properties increased rent prices at record levels. As such, buy-to-let investors have seen significant increases in gross rental yields.
But is substantial rental growth going to continue throughout 2024? The short answer is yes – but not at the same rate.
Savills predicts that the UK will see 6% rental growth throughout 2024, down from the 9.7% figure observed by Zoopla at the end of 2023.
However, many forecasters do not expect property prices to rise during the next year despite mortgage rates falling along with inflation. While some forecasters are more optimistic about prices than last year, they still expect activity to resume once interest rates come down further towards the end of the year.
For this reason, property investors may be able to find a good-value property this year, particularly if they shift their attention to northern regions like the North West, where the average property price is £214,925. Coupled with significant rental growth over the next 12 months, this may be an opportune time to invest in property and achieve a substantial gross yield before house prices rise again.
For more on UK rental growth, take a look at some of our most recent buy-to-let area guides: