With the Renters Reform Bill on its way, a general election incoming and the market still recovering post-pandemic, 2024 will be an interesting year in the property market.
At Rocket, we remain confident that London property is a shrewd investment and there is still plenty of value to be extracted from your property portfolio.
So, for the benefit of existing or aspiring landlords, we wanted to provide some insight into how we see the property market changing in 2024 and how you can prepare or take action to make the most of your property investments.
The biggest factor affecting house and rental prices this year will be inflation.
The major component influencing interest rates is inflation and recently inflation dropped to 3.9%, which is significantly lower than the Bank of England had expected it to fall at this stage.
As a result, it’s likely that interest rates have not only peaked, but they will feasibly come down sooner rather than later next year.
Goldman Sachs believe interest rates will begin falling in February, but our prediction here at Rocket is that it will take until May or June.
Now, the reason I’m so concerned by interest rates is because this will have a considerable impact on the sales market in particular.
It’s expected that while London house prices have already fallen by 5% and they may continue on that trajectory, dropping another 5%,they will likely experience a strong pick up, which is often the case in London, and end the year back where they began.
Rightmove forecast that the interest base rate, from which mortgage lending rates are calculated, currently standing at 5.25%, will be down to 4.75% by the end of 2024 and it will fall even further to 1.75% by 2027.
That’s too aggressive in our opinion, as we can’t see the base rate falling below 3.5%, which would leave mortgage rates around 4.5-5%, but it does mean the property market will be well placed come 2026-2027.
As for the rental market, Savills and Rightmove seem to think that affordability is becoming a real constraint to growth.
At Rocket, we agree to an extent, although in our personal experience, most of the people that we’re letting to seem to have a significant margin of coverage over the rent that they’re paying.
There are also some very reliable guarantors around and so while it is definitely becoming an issue with wage rises beginning to fall at the start of 2024, we predict that there will still be an increase in rental prices of between 5-10% by next summer.
To compare that with others, Savills say rental growth will outpace earnings growth next year and they believe we will see 5.5% rental growth in London, as well as 18% growth over the next five years.
JLL (Jones Lang LaSalle) Real Estate Advisors & Professionals see 5.5% growth in 2024, as well as growth of 26% in rental prices over the next five years in Greater London.
Rental growth, as well as base rates coming down, is good news for investors, which is important because as per our research, there are 28% fewer properties listed to rent on Rightmove as there were pre-pandemic.
This means we’ve lost about a third of the properties that used to be available, hence why rents have increased, but the property market is due a resurgence.
In terms of what this entails for landlords or aspiring landlords, when it comes to getting a mortgage, we would advise sitting tight.
Don’t fix yourself into anything at the moment because the expectation is that interest rates may come down quicker than originally anticipated.
So, if you can hang on in there until the middle of next year there might be some good lower fixed rate mortgages available.
And if you already have a buy-to-let property, ensure you’re getting market rent, because 2024 is likely to be a volatile year in the rental market with the imminent introduction of the Renters Reform Bill.
We expect this to become law around October 2024 and if the rental market is as busy as we believe it will be, you could fix yourself a tenancy for two or three years at market rent and avoid being affected by the potential initial chaos while the market takes time to settle.
If you’re thinking of selling your property, we would advise holding onto it for a little longer if you can afford to.
Research suggests that over the next five years property prices in London will be between 15-20% higher.
So, if you’ve got a reasonable yield on your property and with interest rates falling, when you also consider that you’re going to see a 20% return on your money, it’s hard to argue against London property being an astute investment in 2024.
This might be a lot to take in and the upcoming changes may sound a little daunting, but if you’re a landlord here at Rocket then fear not, we’re prepared to keep you informed and guide you through the coming year, ensuring that your property investments remain profitable.
In fact, we would go as far as saying that we’re looking forward to the challenges and hurdles 2024 might bring in the property market, as we’re confident that whatever is thrown our way, we will overcome it.
