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UK Property Market: A Positive Outlook for Savvy Investors

November 8, 2023

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Article Summary

  • After a 4% drop in 2023, the average UK house price is projected to decrease by just 3% in 2024.

  • In 2025, property prices are forecast to increase by 3.5%, followed by 5% in 2026 and 6.5% in 2027.

  • The Bank of England is expected to initiate interest rate cuts in the second half of 2024, gradually reducing the base rate from 5.25% to 4.75% by year-end.


The UK property market is on the cusp of a transformation, and for property investors, the horizon is starting to look brighter. According to new statistics and figures from Savills, the housing market has weathered its share of challenges and is now poised to emerge stronger. As we navigate the changing landscape of property investment, let’s delve into the reasons for optimism and the opportunities that lie ahead.


Stability on the Horizon

Savills’ five-year outlook presents a promising picture for property investors. After a 4% drop in 2023, the average UK house price is projected to decrease by just 3% in 2024. While this may appear as a modest decline, it signifies a stabilisation of prices after a period of uncertainty. In fact, property values held up slightly better than expected in 2023, thanks to the settling of mortgage markets. This stability suggests that the worst of the house price falls may now be behind us.

Moreover, Savills anticipates the Bank of England to initiate interest rate cuts in the second half of 2024, gradually reducing the base rate from 5.25% to 4.75% by year-end. This potential reduction in interest rates offers an incentive for prospective homebuyers, boosting demand in the property market. Savills further forecasts a substantial decline in interest rates, down to 1.75% by 2027. This progressive reduction in rates is expected to result in enhanced affordability and a steady recovery in property demand.

A Return to Growth

After this period of stabilisation, Savills predicts a return to house price growth. In 2025, property prices are forecast to increase by 3.5%, followed by 5% in 2026 and 6.5% in 2027. This resurgence in growth is underpinned by the gradual reduction in interest rates, which is expected to restore buying power and drive property demand.

The importance of affordability in the property market cannot be overstated. As interest rates decrease, prospective buyers will find it more financially viable to enter the property market. This, in turn, is expected to drive growth and strengthen the overall property landscape.


Implications for Property Investors

For property investors, this positive outlook signifies several key opportunities. First and foremost, the period of stabilisation in 2024 presents a potential window to secure properties at attractive prices. As the worst of the price falls appears to be in the past, investors can explore properties with more confidence, knowing that the market is on the road to recovery.

Investors should keep a close eye on areas where property values have remained resilient. Despite the challenges faced by the housing market, cash buyers have been a resilient group, with their activity exceeding the 2017-19 average. Understanding the dynamics of these areas can be valuable in making informed investment decisions.

Additionally, investors should remain mindful of the changing landscape in London and the south-east. These regions may experience slightly greater price falls in 2024 due to larger deposit requirements and higher borrowing relative to income. However, this presents an opportunity for investors to identify potential bargains in these areas for future capital appreciation.


A Brighter Future for Prime Property

Prime property in central London, representing the top 5% to 10% of the market, is poised for a brighter future. This segment is projected to avoid price falls in 2024, driven by international and affluent UK buyers. Despite political uncertainty and higher taxes, luxury properties in London could experience significant gains over the next five years. This offers a unique opportunity for investors with a penchant for prime real estate.

In conclusion, the UK property market is emerging from a period of uncertainty, presenting property investors with a more optimistic outlook. The expected stabilisation of prices in 2024, followed by a return to growth, offers potential opportunities to secure properties at attractive prices. The gradual reduction in interest rates and increased affordability are set to drive demand and growth in the property market.

For property investors, the key lies in strategic investments, keeping a keen eye on resilient areas, and exploring the potential for prime property in London. As the market continues to evolve, staying informed and proactive will be essential in making well-informed investment decisions and capitalising on the positive trajectory of the UK property market.

To find out about more of some of the most attractive new-build and regeneration projects that the UK has to offer, click here.

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