UK House Prices to Grow to 2027
Since the pandemic, we have seen house prices in the UK follow a significant upward trajectory. And as the market becomes more volatile, speculation has grown, and many are wondering if another UK housing market crash is set to happen.
Interestingly, in November, house prices grew at the fastest annual pace in two years, according to a survey conducted by Nationwide. The lender stated the price of the average UK home actually increased by 3.7% in November compared to the year before.
The lender stated the increase in house price growth was “surprising, since affordability remains stretched by historic standards.”
UK Property Market Predictions (2023-2027)
2023-2024
During this period, the prediction of a slowdown in the housing market was largely due to the anticipated increase of the base rate from 2023-2024. Savills anticipated the base rate would reach 4% in early 2024, and remain at such a level until mid-2024, where it would decrease.
2025-2026
Savills believes the drop in house prices will be a temporary state, differing from the previous financial crisis. If mortgage lenders reduce rates within the next year, with the base rates dropping from mid-2024 with falling inflation, Savills predicts a 7% increase in house prices in 2026. With this calculation, the UK housing market crash is quite unlikely.
2027
According to the Office for Budget Responsibility (OBR) they predict a rise in property price of 3.5% in 2027. However, Statista has forecasted an average increase in property price of 1.7% between the years of 2023-2027.
Predictions for the UK Rental Market
During this time, the rental market in the UK has seen some significant transformations – particularly in the areas of London and Birmingham. With a great uptake in construction activities, investors and PBSA ventures, we are seeing a great focus on housing projects.
And in the Birmingham area, we have seen entire houses being rented out to groups of students. This process is being facilitated by letting agents, who list properties with multiple bedrooms that enable students to rent an entire house together.
However, despite the developments, the UK rental market has seen a slower demand throughout the year. We have seen student occupancy levels of around 60%, contrasting to the usual 95%. It is understood various factors could be contributing to this decline, like a shift in student enrolment patterns.
The UK’s Buy-to-Let Market
With the rise of mortgage rates, tax changes and amendments to regulations, we are seeing added pressure on landlords with buy-to-let portfolios. There has been a reduction in tax relief, capital gains tax allowance has now been halved multiple times and the Renters Reform Bill is putting an end to ‘no fault’ evictions.
It may be harder for landlords to continue repaying their mortgages, with a potential increase in repossessions.
If you are debating purchasing or developing buy-to-let properties, you need to ensure the property is going to generate a positive cash flow, even in the event of interest rates rising and housing prices falling. Conduct thorough research into UK house price predictions, rental demand and potential return on investment to prepare yourself for possible obstacles in the near and distant future.