House Price Forecasts
Despite some early signs of optimism at the start of the year, Cushman & Wakefield expect house prices to decline in 2024. House prices are forecast to fall 0.5% in the UK and 1.5% in London in 2024. House price growth is expected to decline, albeit moderately, given affordability pressures - worsened by the elevated mortgage rates - and the increased levels of stock on the market. The general election is unlikely to have impacted those in the process of moving but might have stalled those buyers who were contemplating an upcoming move, therefore starting the natural summer slowdown early. London will perform more negatively than the UK, following a weaker performance at the start of the year and given London’s greater exposure to affordability pressures.Pent-up buyer demand from a slower market in 2023 and 2024 will lead to an increase in demand, translating into a strong recovery in house price growth in 2025 and 2026. The recovery will be slow and steady as the market anticipates for base rates cuts to filter through to mortgage rates alongside an improvement in buyers’ affordability and confidence. London will perform better than the UK, with more room for recovery and higher disposable income forecasts.
House price growth will continue into 2027 and 2028, but the level of growth will ease. The housing market will remain unaffordable to many households, worsened by a diminishing new homes pipeline and lower wage and disposable income growth forecast. London will see a greater slowdown in house price growth, losing momentum more quickly than the UK.
Rental Forecasts
So far in 2024 the pace of rental growth has slowed. UK annual rental growth reduced to an average of 7.4% between January to May 2024, down from 10.0% the same time last year. The slowdown in rental growth is the result of the supply-demand imbalance heading towards a more ‘normal’ level, with demand reducing slightly and stock levels seeing a small uptick. Although the gap has reduced, the long-term supply-demand imbalance remains. There is still a shortage of homes available to rent, and the renter population is forecast to grow. This imbalance will continue to support rental growth, but at a more sustainable level than we have seen in the last three years.
As a result, Cushman & Wakefield forecasts rents to increase by 5% in the UK and 4.5% in London in 2024. London’s performance is forecast to be lower than the UK, following a weaker performance so far this year, and with the capital more exposed to affordability pressures.
Beyond 2024, Cushman & Wakefield forecast rental growth to continue to slow towards a more sustainable level. The continued slowdown is largely down to the more ‘normal’ supply-demand imbalance, inflation remaining around the 2% target and wage growth cooling. Post election the rental market is likely to face some adjustment to political change, with renters' rights expected to be a key priority. Political changes to the rental market may further limit the supply in the short-term and will therefore keep some upward pressure on rents.
