The U.K. property market has been a rollercoaster for renters and prospective homeowners alike for over a year now. Rents soared as supply and demand imbalances led to fierce competition for rental properties, while mortgage rates hit a 15-year high earlier this year. However, experts suggest that the coming six months could be a good time to enter the market.
Tom Bill, head of U.K. residential research at Knight Frank, told CNBC that now could be the best time to enter the property market. With the Bank of England likely done hiking interest rates and speculation shifting to when rates will be cut, mortgage rates are unlikely to fall sharply. This makes the coming months an attractive time to get on the property ladder.
Despite higher mortgage rates typically leading to a decline in house prices, prices remain above pre-pandemic levels. However, transactions have fallen by 23% this year, providing an opportunity for buyers to negotiate harder on price.
Richard Donnell, executive director for research at property data firm Zoopla, suggests that prices could continue to fall by another 2% over 2024 as pricing adjusts to weaker buying power, even if mortgage rates fall back further. However, he also notes that it’s a good time to get into the market and negotiate harder on price with 40% more homes for sale than a year ago.
While the property sales market shows promise, the rental market is expected to remain tight, with rents continuing to rise. Supply and demand imbalances, high mortgage rates “trapping would-be buyers” in rentals, and strength in the labor market and high immigration levels all play a role in this. Donnell suggests that the supply/demand imbalance will remain into 2024, but demand will weaken as affordability pressures build.
Despite some areas seeing an increase in supply, demand mostly still outweighs it, according to Bill, indicating that the rental market hasn’t fully normalized yet.
One potential headwind for the sales market is the general election expected to take place next autumn in the U.K., which often slows down property markets, particularly where a leadership change is expected. However, for potential homeowners and renters, there appears to be some hope on the horizon in the U.K. property market.