While no one knows precisely what will happen in 2024, economists believe interest rates and inflation have peaked, and that the economy will continue to rally.
Here’s an idea of what forecasters predict for the next 12 months*.
Demand
The long-term imbalance between supply and demand in the property market shows no sign of abating. So, the strong levels of demand and high occupancy seen this year look set to continue. Zoopla predicts rental growth of 5% to 6% in 2024 (this year, it nudged 9%).
Changing search criteria
As a result of the increased cost of renting, there has been a rise in renters sharing with other people, looking for homes in cheaper areas and looking at smaller properties. The latter is part of a long-term trend. The Resolution Foundation says that over the past two decades, there’s been a 16% reduction in floor space per renter.
Energy efficiency
The high cost of heating and powering a home means many tenants are paying closer attention to the energy efficiency of a property – a trend expected to continue into 2024. About 57% of renters say they’d be less likely to look at a property if it had a very poor energy rating (Shawbrook Bank).
Mortgages
After several rises in interest rates this year, the tide appears to be turning. The Bank of England base rate is currently stable and could fall to 4% by the end of 2024 (Source: Berenberg Bank) and 3% by the end of 2025 (Source: Capital Economics).
It’s unlikely we’ll see a return to the historic lows we saw a few years ago, but many will welcome the fact that the mortgage market appears to be steadying.
Meanwhile, landlords should also expect to enjoy a wide product choice when arranging a mortgage. Back in October 2022 (when we were all reeling from the ‘mini’ budget), there were 1,000 buy-to-let fixed-rate and variable products on the market. A year later, that figure has grown to 2,500 (Source: Moneyfactscompare.co.uk).
Inflation
This year, inflation had a noticeable effect on the cost of materials and labour for repairs and renovation. However, change is afoot. Price rises are slowing (inflation was 4.6% in October, down from 6.3% the month before). Number crunchers at the Bank of England expect inflation to be 2% by the end of 2025.
If you’d like more insights on the local rental market, contact us here at Spencer Harvey today.
*None of us has a crystal ball. The figures in this article are predictions, not guarantees.
