Analysis of the property market in the UK
A survey of the early 2024 property market has shown good prospects for those wishing to buy residential property in the UK. It is expected that mortgage rates will continue to fall and inflation will be reduced. This will allow buyers to be motivated to conclude a deal as soon as possible, because the new conditions will save financial resources significantly. The purchase of residential property is a reliable way of investing money and, if well managed, brings considerable dividends.
Affordability of buying a property nowadays
To live apart from your parents, to move for the duration of your studies, to choose a house closer to your work – there are many reasons why people decide to buy a property. For everyone it is a personal story and their own life circumstances. However, there are general trends in the property market that increase the volume of flats for sale. Every year a survey of potential buyers is conducted to find out the desired timeframe for the transaction. As a result of the research it was found out that among more than 1400 potential buyers, the share of those willing to move within six months has increased by 30%. And when you consider that in July 2023 the increase in this figure was only 14%, it is clear that there is now a strong demand for residential property.
It is not uncommon for flat buyers to rely on a loan in their endeavours, as their own funds are not always sufficient to cover all expenses. Such people have to keep a close eye on bank forecasts, choosing the period of the lowest mortgage interest rates. Now these rates have begun to decline, creating suitable conditions for the execution of the loan. By taking a loan in the near future, people will be able to save a significant part of their own funds compared to the previous year.
The majority of those surveyed believe that 2024 will be the most favourable year in recent times to make a move to a new home. What is curious are the reasons that led people to make the decision to buy. Opinions split into 3 general trends in the following percentages:
- 57% of respondents state that the purpose of the purchase is to improve their living conditions;
- 31% of respondents are going to make a purchase in the near future because of more affordable conditions on the market than they had before;
- 12% want to safely invest their existing finances to preserve and multiply them. Other investment options do not seem to them to be suitable and sustainable enough in a constantly changing reality.
The Royal Institution of Chartered Surveyors (RICS), the society of professional estate agents in the UK, has also assessed the performance of the property market in December 2023. Their information fully confirms the highest number of property purchase enquiries in the last approximately two years of research.
Motivation for the purchase of residential property
There are quite a lot of reasons to move to a new home, but when conducting a survey of the property market, it was possible to bring all the answers of respondents to more universal formulations. Now it is possible to get an objective idea of the most frequent reasons for changing the permanent place of residence. This will help better understanding between sellers and buyers, as well as respecting the interests of each party. The most frequent motives are the following:
- adjusting living conditions to their needs. Among the supporters of this opinion there are many who are going to change their flat for a smaller property. People explain this fact by the fact that the current premises exceed the necessary range of needs. The average person wants cosiness, a reasonable number of things, simplicity and speed of cleaning;
- part of respondents say that they have managed to save enough money for the first mortgage instalment;
- some tenants of residential property make calculations and realise that the monthly costs of paying for a flat and potential loan payments are virtually the same, and in such circumstances it is more advantageous to buy their own flat or house;
- pensioners are often prepared to reduce the size of their living space for the sake of withdrawing free money, for example, for further investment, travelling or organising hobbies;
- Another option was the desire of buyers to live closer to their place of work in order to save time and money on travelling;
- part of respondents stated a desire for a better view from the window – to contemplate the historical centre of the city or local attractions.
Changes in the rental business
Despite tenants’ expectations, rent growth in the first three months of 2024 remains at a fairly low level, with premium flats rising in price by 3.2% year-on-year. Outside London, rental properties added slightly more, 0.9% over the quarter, so rents rose by 4% over the year.
Further price levels are influenced by the various tenancy reform bills. They bring clarity to the rental business sector, help to resolve current disputes and provide additional protection for both tenants and landlords.
Expectations regarding the level of property purchase prices in the UK
Potential property buyers were also surveyed about making changes to the budget they have available to purchase a home. The results give a clear picture of real financial possibilities and allow residential property experts to make their own forecasts of market conditions in the near future. The distribution of the answers of the respondents is as follows:
- the majority of possible buyers note that they are not ready to change the amount of money they have planned to buy a property;
- 14% had to state a reduction in their budget for a possible move, due to current financial capacity;
- almost as many are ready to buy a property for a higher price, if the proposed option will have clear advantages over the previously planned one.
Every eighth respondent notes that they will now be able to reduce the planned amount of the mortgage loan without having to adjust their monthly financial plan. For this purpose, deferred cash and other capital available in the family will be used. When comparing the number of cash purchase transactions in 2023 to the pre-pandemic period, there is a significant jump: whereas previously the total number of such purchases was only 35 per cent, the figure has recently risen to 43 per cent. Meanwhile, mortgage approvals continue to rise, surpassing the 60,000 approved loans bar, steadily approaching the pre-pandemic level of 66,000.
If we look at the trend of residential property prices, a decrease in value of about 3% is expected in 2024. This also suggests an improvement in the market as a whole, as more serious falls have been recorded in the past.
As far as high-end property is concerned, this segment is expected to be virtually unaffected by inflation and other downward factors. It is all about less dependence on mortgage lending. Due to this, the top 5-10% of the price range confidently hold the leading positions, without reducing sales volumes. Thus, the cost of luxury property in Central London will not fall and will steadily take its place at the top of the ranking of the most expensive homes, as for the last six months there was an increase in value by 0.1%. Other prestigious cities are also recovering more quickly from the pandemic and increasing sales volumes in the residential property market. Suburbs remain less in demand, but there is an improving trend in this area too. According to March sales analysis, the early Easter did not affect sales activity – compared to March 2023, sales in March this year were up 4 per cent.
The upcoming elections are also a factor hampering the development of the residential property sector. Some buyers postpone transactions until the outcome of events is determined, as it is not possible to reliably determine the outcome of the election. If either party wins, there will be changes that will affect the market.
According to all studies, experts expect that 2024 will be the most successful period when it is profitable to sell and buy property. On the one hand, investing in the purchase of a new home is a reliable investment for the future, and on the other hand, it is now that the prices of objects are falling, making them more affordable to buy. The banking sector is not lagging behind, attracting market participants with reduced interest rates on mortgages. In short, it is safe to say that buying a flat or house in the UK is now becoming easier and more affordable than in previous years.
FAQs about the situation on the property market in the UK
Why buy residential property in the UK?
Often, buyers purchase residential properties for two future uses:
- personal residence;
- leasing.
When it comes to moving, including from abroad, the search for the right property is usually based on transport accessibility to work or school. You can also choose a flat near a park – it all depends on your personal preferences and priorities. The year 2024 is the period when the market is full of available options. Of all the variety of houses, there is more than one that will suit all the needs of the buyer. At the same time, loyal bank mortgage terms, if necessary, can come to the rescue.
Almost any type of residential property is suitable for renting out but later flats in the city centre and near prestigious educational institutions will be in high demand and, consequently, the best rental rate. If you choose wisely, you can successfully invest your capital and have a regular income.
What hidden costs will there be when buying a residential property in the UK?
In addition to the cost of the property itself, there are several additional costs that cannot be avoided in England:
- stamp duty;
- land cadastral fee;
- payment of attorney’s fees for the proper execution of documents.
What types of mortgage lending are available in the UK?
UK banks offer many different loan options. If you take the time and look into each option, you can choose the best one where regular payments are comfortable and overpayment over and above the value of the property is minimised. Some types of mortgages:
- fixed rate – for the first few years the interest rate is fixed. After the expiry of this period, the bank automatically starts applying a floating interest rate, but there is a possibility to renegotiate the loan agreement and set a new fixed rate period;
- floating interest – where the amount of the overpayment depends on the Bank of England’s refinancing rate;
- offset mortgage – if the principal part of the loan is repaid with funds from the buyer’s bank account, then interest is charged only on the amount that remains to be repaid, which significantly reduces repayments;
- with a threshold – the agreement defines an indicator above which the floating interest rate may not rise;
- cash lending – some part of the loan is given in cash to the buyer of the property. This increases the interest rate, but provides funds for moving, renovating or buying furniture.
There are other forms of credit, and for more up-to-date and detailed information it is worth contacting a bank officer. They can help you assess your available capital, your upcoming expenses and help you choose the right type of mortgage. We recommend visiting several banks, familiarise yourself with the conditions in each, and then stop your choice on the best option. The main thing is not to hurry or delay, but to buy property in the UK while the conditions for such deals are the most favourable.
