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What are you planning for your property investments as we approach the new year? Here, we analyse average house prices, rising rents, and yield data to show you what to expect in 2024.

The past few years have seen plenty of market volatility to last landlords a lifetime. If rising interest rates, tightening legislation, and overall economic uncertainty weren’t enough, mainstream media has played its part in highlighting the challenges landlords have faced. With headlines focused on a ‘mass exodus’ of landlords, interest rates spiking to unaffordable levels, and the abolishment of Section 21, it’s understandable that many landlords are feeling disenfranchised as we approach the new year.

It's essential that property investors have a more balanced overview of the current state of the market. Below, we discuss the predictions for average house prices, mortgage interest rates, and rising rents to give you an idea of the types of yields you could earn and the opportunities available in 2024.

 

Average house prices

The Government’s UK House Price Index Summary reveals the average price of a UK property in November 2022 was £294,910, with an annual house price change of 10.3%. A year on, the average house price is currently £259,557 according to Nationwide’s House Price Index, and the annual change is at -2.0%.

The percentage change over the past year and drop of circa £30,000 in average house prices is primarily due to rising mortgage interest rates tightening buyer appetite and the wider cost of living crisis delaying purchase plans.  

As the graph above shows, annual price change is slowly returning to 0%, but industry experts are unanimous that we will see further growth between just -2% and 0%. As such, for property investors planning a new purchase in 2024, you can be confident that house prices will remain fairly stable for the foreseeable. With prices much lower and sellers keen to move, there’s ample opportunity for landlords to secure a competitive deal.

Rising rents

The last 18 months have seen an ongoing trend of demand significantly outstripping supply, which has been the primary contributor to rising rents. However, the imbalance has begun to ease, albeit not enough yet to impact rental prices.

Annual rental price growth is currently 10.5%, down from 12.1% a year ago, reflecting the slow supply vs. demand disparity improvement. Furthermore, demand for rental properties is 20% lower than last year; however, it remains a staggering 51% above the 5-year average. Looking at rental supply, the number of homes available to rent is up 20% from last year but is still 30% below the average for this time of year, according to Zoopla's rental market report.

The Zoopla report expects rental growth to end the year at over 9%, 3% over earnings growth at 6%. For 2024, rents for new lettings are predicted to continue to rise, and Zoopla expects we will see UK rental growth of 5-6% in 2024.

 

Rental yields

Research from lettings and estate agent, Benham and Reeves, calculates average rental yields based on an average buy to let property price (different from the average UK house price cited above) of £289,824 and an average monthly rental income of £1,276. With this in mind, landlords, on average, earn an annual income of £15,312 per property, a gross rental yield of 5.3%.

This average yield is up from 4.8% in the last month, and with the outlook for rents showing signs of further growth, yields will follow the same trajectory. As mentioned above, with house price growth likely to remain stable over the next year and rents rising, albeit at a slower pace, landlords can earn highly competitive yields by focusing on the right property types and in the right regions. For further insight into the outlook for 2024, read our article here.

 

What’s next for mortgage interest rates?

The outlook for mortgage interest rates next year is positive, with many industry experts and economists predicting easing to rate pricing. Despite new uncertainty over whether we will see a Base Rate decrease as early as previously anticipated next year, the likelihood is this won’t impact mortgage rates coming down.

SWAP rates have a more significant impact on mortgage rate pricing than the Base Rate, as these are what lenders pay other banks and financial institutions to acquire fixed money for a certain period of time. The graph below highlights how closely mortgage rates follow SWAP rates:

With SWAP rate movement relying mostly on money market confidence and wider economic activity, we can expect mortgage rates to continue on their slow downward trajectory.

 

Is 2024 the year to invest?

As you can see, the economic forecast for 2024 shows a positive landscape if you’re looking to expand your buy to let portfolio or make your first investment. Stable property prices, strong rental demand, rising rents and softening mortgage interest rates provide the ideal conditions for investing in property.

Of course, we can’t ignore the legislative battles going on in the background, but the recent pause on the abolishment of Section 21 “no-fault” evictions strongly suggests that the government is starting to listen to our landlord community’s concerns, and realising how integral the PRS is to the UK’s housing provision.

To find out the types of rates you could access or to speak to one of our expert brokers about the current buy to let market, get in touch on 0345 345 6788 or submit an enquiry here.


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