UK Home Price Growth to Lag Inflation Significantly in 2024
British home prices are projected to rise by only 1.3% this year, a figure well below the current inflation rate of 3.1%. The stagnation is driven by high mortgage rates and reduced buyer activity, while rental costs continue to climb.
British home prices will increase by 1.3% in 2024, according to a new survey. This growth rate is significantly lower than the previous forecast of 1.8% from June. The median estimate comes from a poll of 16 property experts conducted by Reuters.
Inflation in the UK reached a five-month high of 3.1% in August. Home price gains of 1.3% therefore fail to keep pace with the rising cost of living. Buyers face a real-term loss in purchasing power over the next twelve months.
Mortgage rates suppress buyer demand
Lenders approved the fewest mortgages for house purchases in July since January 2024. This data was released by the Bank of England. High borrowing costs continue to deter potential buyers from entering the market.
The Bank of England kept interest rates unchanged on Thursday. Governor Andrew Bailey warned that prolonged geopolitical conflict may necessitate tighter policy. The US Federal Reserve also raised its key rate recently, signaling a global trend toward higher costs.
Rental prices face steeper increases
Nationwide rental prices are expected to rise by 3.0% in 2024 and 2025. This growth rate exceeds the projected increase for home values. The supply of available rental properties is shrinking as fewer landlords enter the market.
High borrowing costs are pricing out many would-be buyers. These individuals are forced to remain in the rental sector. This shift in demand is pushing private rent prices higher, according to data from official sources.
London market shows price decline
Home prices in London are forecast to fall by 1.4% this year. This decline is steeper than the average for the rest of the country. The average cost of a London home reached £646,451 in August, making it unaffordable for many first-time buyers.
Forecasts for London were lower in this survey than in the June poll. The city is expected to see a 0.9% price increase in 2027. This rebound will be modest compared to the initial drop.
