The UK housing market has seen exponential growth over the last decade with the average property price increasing over 50% since 2014, according to the Land Registry House Price Index. For investors seeking opportunities in an established, stable real estate market, the question remains: is now a good time to buy houses?
Industry experts suggest now may be an ideal time to invest in UK property for maximum capital growth and rental yields. However, this suggestion isn’t without a caveat — read on to learn more!
Is Now a Good Time to Buy Houses?
While there are uncertainties about the housing industry’s performance, most evidence suggests it is a good time to buy a house in the UK.
The latest 2024 house price predictions from the majority of experts indicate a decline. However, some suggest there will be a 3–4% increase in house prices in 2024. This dichotomy in opinions makes it difficult to determine if buying a house now is, without doubt, a good idea.
According to the data obtained from the nationwide house price index, UK house prices fell by 1.8% by December 2023. This trend was projected to continue in 2024, with some experts estimating price declines of up to 5% over the next 12 months. For investors, falling house prices mean that residential properties in Britain are becoming more reasonably valued and affordable.
Purchasing a home when the market is softening allows buyers to get more value for their money and find bargains. Investors can acquire properties at a discount and benefit when home values start to rebound again.
While no one can predict exactly when the housing market will recover, a Savills’ residential research team director anticipates a turnaround by 2026 as the economy strengthens. For investors seeking solid returns over the long run, buying at the bottom of the market cycle is a sound strategy.
With professional guidance from wealth managers, international investors can build wealth through the selective acquisition of properties across the UK’s up-and-coming areas. We’ll dive deeper into why buying a house right now is worth it by analysing those factors influencing the housing market’s performance in 2024.
2 Factors Impacting the UK Housing Market in 2024
The factors contributing to this year’s uncertain property market predictions include:
- Interest rates and unemployment
- General election and housing shortages
1. Uncertainty in Interest Rates and Unemployment
While interest rates remain unchanged, the Bank of England warns they may increase rates if inflation rises. From our experience at API Global, interest rate hikes often slow housing markets as mortgages become more expensive. Coupled with increasing unemployment across the UK, it’s increasingly impossible for people to afford home loans, which might bring down the price due to lack of demand.
2. The General Election and Housing Shortage
The 2024 general election also brings uncertainty that could temporarily soften the housing market. Yet, the UK’s steady population growth combined with an ongoing housing shortage suggests continued high demand for homes, especially in up-and-coming areas.
Areas outside London, such as Manchester, Nottingham, and Birmingham, are attracting both domestic and foreign investment due to lower house prices and solid rental demand. New high-speed rail connections are also making commutes into major cities more viable from surrounding towns.
Overall, the UK housing market faces some headwinds in the short term but maintains positive fundamentals for the long run. For investors, building a balanced property portfolio across different UK regions may help mitigate risk while still achieving good capital growth and rental income over the coming years. The rental property market’s resilience through past downturns also suggests it can navigate current uncertainties — for those able to take a long-term view, it is a good idea to buy a house now.
That said, some regions have always performed better for property investment. And as experienced UK property investment experts, we’ll recommend some top areas in the next section.
3 UK Regions We Expect to Perform Well
For international investors looking to capitalise on a resilient market, now may be an opportune time to buy property in certain UK regions expected to see strong house price growth again over the coming years.
These regions include:
- The North West
- The Midlands
- Scotland
1. The North West
The North West of England, including cities like Liverpool and Manchester, offers affordable property prices and massive projected price growth over the next few years. Up-and-coming neighbourhoods close to job centres and amenities are likely to see the strongest capital appreciation. What’s more, rental yields in the area stand at 6.52%, making North West buy-to-let investments a wise decision. To buy properties in these regions, investors should contact their wealth manager for advice.
2. The Midlands
Major cities in the Midlands, such as Birmingham and Leicester, provide a lower cost of living and solid investment potential. Housing prices in the Midlands are still affordable, indicating buying a house right now is worth it. Infrastructure upgrades, redevelopment projects, and business investment in cities like Birmingham will likely drive up property values over the medium term. For buy-to-let investors, the Midlands offers affordable properties and healthy rental yields of around 5.7%.
3. Scotland
Scotland’s largest cities, Edinburgh and Glasgow, offer an appealing combination of cultural attractions, natural scenery, and employment opportunities in growing sectors like tech and finance. While Scottish house prices have risen over the past few years, they remain affordable compared to other parts of the UK. New transport links and urban regeneration schemes are poised to boost property prices, especially in central, well-connected neighbourhoods. Investors can find good value in Scotland, with gross rental yields around 7.3%.
Outside of London and the South East, these regions show promising signs of price growth and solid returns. However, as with any property market, there are risks to consider regarding local economic conditions, housing policy changes, and external shocks that could impact values. For international investors buying UK property, for example, currency fluctuations may also affect the total cost and returns on investment. This begs the question, should I buy now?
Should I Wait to Buy a House? (3 Considerations)
Investing in property is always a long-term strategy, so whether now is a good time to buy a house in the UK depends on personal circumstances and an investor’s goals and risk tolerance. For local and international investors seeking capital growth and rental income, there are compelling reasons to invest now despite economic uncertainty.
According to the Office for National Statistics, UK house prices grew 6.9% year-on-year in the 12 months leading to January 2023. However, in the 12 months leading to October 2023, the average house price in the country declined by 1.2%. For investors with a 5–10-year horizon, the current low pricing presents an opportunity to enter the market at a discount, positioning them for significant capital gains over time.
With this background information in mind, investors should look into these 3 considerations when deciding whether to buy a house now or later:
- Cheaper houses mean higher returns
- Strong rental demand and income
- Financing may become more accessible
1. Cheaper Houses Mean Higher Returns
When house prices fall, investors stand to earn a higher return on investment (ROI) when selling, as capital gains are calculated based on the difference between purchase and sale price. Buying at a 10–20% discount to peak pricing could likely translate into an additional 10–20% in capital gains. With mortgage rates remaining fairly stable throughout 2023, property remains fairly affordable and is a great way to lock in capital for returns over the long term.
2. Strong Rental Demand and Income
While house prices have slowed, rental demand in the UK remains high, especially for affordable housing. Rental yields average 5% nationally as of November 2023, providing investors with an ongoing income stream to support financing costs. It is wise to buy a house now, especially in up-and-coming areas outside of London, due to lower property costs and high demand from renters seeking affordability.
3. Financing May Become More Accessible
Although interest rates from lenders have remained fairly stable throughout 2023, the declining inflation rates suggest interest rates from the Bank of England may have peaked. There’s a chance this means mortgage lenders will reduce rates following a drop in inflation and a subsequent reduction in interest rates from the UK’s central bank. If this happens, investors can take advantage of the market conditions to reduce mortgage payments burden with a fixed low rate, reducing risk while maximising cash flow.
While economic uncertainty could weigh on price growth in the short term, the UK housing market has historically been very resilient. For investors taking a long view, buying at a discount during a downturn and holding assets for the long run could be a successful strategy for making money from property.
With strong fundamentals supporting the market, the evidence suggests it is good to buy a house now to gain exposure to UK residential property. So, what are the steps investors need to take to ensure profitable investments in their next property deal? Read on to find out!
5 Steps to Take Before Buying a House in 2024
Investors looking to purchase property in the UK in 2024 should take the following steps to ensure the best possible investment:
- Do extensive research on areas and property types.
- Determine a realistic budget.
- Find the right property.
- Secure financing.
- Finalise legal details.
1. Do extensive research on areas and property types.
Investors should conduct thorough research on various UK cities and towns to determine which locations are poised for the strongest growth and return over both the short- and long-term.
Up-and-coming urban centres with strong employment opportunities, infrastructure improvements planned, and affordable housing options have historically experienced significant increases in demand, which drives property values up. In addition to location, investors must consider the type of property that will best meet their investment goals — residential/commercial, apartment/house, etc. At API Global, we recommend residential buy-to-let apartments for the strongest gains.
Ultimately, investors should contact their wealth manager for the best investment-worthy locations.
2. Determine a realistic budget.
Once target locations and property types have been identified, investors need to determine how much they can afford to spend on their purchases while still achieving their desired returns. Factors like interest rates, taxes, insurance, and maintenance costs must be accounted for in any budget.
Working with a top mortgage lender, broker or financial advisor with experience helping foreign nationals invest in UK property can help investors create a comprehensive budget. To get started with property investment at API Global, investors generally require a £5K reservation fee and a 20% down payment. Investors should contact their wealth manager for more information.
3. Find the right property.
With research completed and a budget set, investors are ready to begin searching for properties that meet their criteria. At this stage in the property ladder, investors should work with a reputable property advisor who understands their needs and objectives. They can provide details on properties across the market, including special offers that may not be available to the public.
4. Secure financing.
Most investors will require at least some financing to fund their property purchase. Foreign nationals looking to buy investment property in the UK have several options, including both traditional mortgage products and alternative lending sources. Interest rates and lending criteria will vary between different banks and lenders, so shopping around and comparing multiple options is recommended. Wealth managers can also make reasonable recommendations on mortgage providers depending on an investor’s profile.
5. Finalise legal details.
Once an offer has been accepted on a property, there are several legal steps required to complete the transaction. Investors will need to appoint a solicitor to handle all conveyancing and ensure both parties sign the proper contracts and paperwork.
For foreign buyers, additional considerations around currency exchange and taxes may also apply. The requirements can quickly get complicated without proper guidance. Hence, we recommend investors consult with their wealth manager and partner with UK property investment experts to finalise the purchase and officially become a property owner in the UK.
Frequently Asked Questions
Is this a good time to buy a house in the UK?
Evidence suggests this is a good time to buy a house in the UK. The housing market is currently in a downturn due to economic struggles and high mortgage rates. With Zoopla predicting a 2% fall in house prices and a potential decrease in mortgage rates in 2024, now is a good time to buy.
Will house prices drop in 2024 in the UK?
Most analysts and lenders predict that UK house prices will drop by up to 5% in 2024, while some forecast a 3–4% increase. While a drop in price could make property purchases more accessible, it’s also predicted that rental costs will continue to rise. Therefore, investors should assess their financial situations and market trends to make informed decisions.
Should I buy a house in 2024 or 2025 in the UK?
Evidence suggests investors should buy a house now in 2024 to take advantage of the current depreciation. Based on Savills’ prediction, house prices in the UK are predicted to dip by 3% in 2024 before a potential recovery in 2025. However, future house price falls are uncertain and actual outcomes can differ from forecasts. It’s important to consider all factors and consult with a wealth advisor before making such a significant decision.
Is it a buyers or sellers market in 2024?
The year 2024 is potentially a buyer’s market in the UK. Conditions like prolonged listing durations and seller desperation could lead to lower offers being accepted, favouring first-time buyers. As homes continue to sit on the market longer, sellers might feel compelled to consider offers that they wouldn’t have in a more robust market. However, market dynamics can vary by location and property type, so it’s important to research specific property developments and areas of interest as a first-time buyer.
Conclusion
While there are certain risks to investing in the UK housing market, especially with the possibility of continued high interest rates, the opportunities for strong returns over the long term appear promising.
So, is now a good time to buy houses?
Judging by the projected figures, investors seeking rental income and capital growth over the long term should consider buying a house now. The catch is to select a location with the potential for good investment returns. We recommend investors contact their wealth manager to guide their investment decisions.
Disclaimer: Any information API Global provides does not constitute financial advice and is for educational purposes only.
