Taking the temperature of the national and local housing market

Hello readers,

In my previous blog I started a mini-series looking at the economy, political landscape and where the property market is at as we’re coming up to half way through the year.

In this article I will be spending time looking at the property market and thought I’d start with the predictions I made back in December when gazing ahead to 2024. In that article I highlighted how predictions were that:

• Rents were to rise by 5%
• House prices would drop by 2% – 4% with prices starting to increase again in 2025

House prices

In the past few weeks, Knight Frank released an updated forecast, and the headlines are actually quite encouraging! The key takeaways from the forecast are how:

• The UK housing market has performed better than many anticipated so far this year, with average values increasing by 1.1%
• The outlook for 2024 has improved since our last forecasts in November, primarily due to falls in the cost of mortgage debt. We now expect UK house prices to rise by 2.5% this year
• However, the market remains sensitive to short-term fluctuations in the cost of debt and political uncertainty in the run-up to the general election
• Improving economic performance, combined with steady cuts to the base rate, will create more capacity for growth from 2025

So, it looks like on a national level we can expect prices to rise rather than drop this year and by 2.5%, which is the average value I use when calculating appreciation.

Savills has outlined a projection to the end of 2028 highlighting how house prices are likely to rise by 21.6% and you may notice the prediction of a base rate drop to 4.5% by the end of the year.

But what of a projection for the Medway market? Well, it’s still positive, however a little lower than the national picture at 18.2% by the end of 2028 (still positive in my view) and this is broken down as the below:

It will be interesting to see how this pans out for Medway, as house prices for the Medway Towns are currently 4% down on the previous year, but 2% up on the previous peak which was 2021. This is, however, better than the performance in February which saw a drop of over 5% for Medway properties.

What does this mean for investors and surely house prices dropping is a bad thing? Ok, so it’s not ideal for those needing to remortgage or looking to sell but it’s a good sign for those looking to grow their portfolio as it means there will be some deals out there.

But why is Medway performing this badly compared to the rest of the UK? I think it’s important to cast your mind back to the post-pandemic housing bubble where we saw a significant number of people moving from London out and Medway was a hotspot for this.

With the pressure cooker of huge demand and reduced supply, house prices were obviously over-inflated and we’re now seeing a correction. It’s important to remember how you need to be in property for the long game though, as Medway house prices have increased by an average of 6.65% per year over the past decade compared to 4.95% for the UK (meaning Medway has significantly out-performed the national average!).

Rents

According to Homelet, average rents have increased by 7.9% compared to the past year, with 6.4% in the south east. Interestingly, I think that we may actually see the 5% increase by the end of the year as I don’t doubt that demand and supply may rebalance.

For the investor, we’re seeing rents increase to cover things such as higher mortgage costs, but as rates ease over the coming years it will be interesting to see if rents continue to keep pace or slow down, leaving landlords with more money at the end of each month in profit.

I’m sure you will agree that there’s a lot to take in here but the outlook certainly seems to be fairly positive compared to where we were in December!

Hasan