A new report by development finance lender Atelier, compiled by Nicole Lux, a senior research fellow at London’s Bayes Business School, predicts a significant upturn in the UK housing market. The report suggests that the market is approaching the bottom of its current cycle, with a sustained period of recovery on the horizon, driven by stabilising interest rates and increasing housing demand. Ives & Co, a leading solicitor in Nottingham, can assist you with residental conveyancing.
The report, which analyses data from primary sources dating back to the onset of ONS house price statistics in 1969, examines long-term trends and provides a medium-term outlook on critical factors influencing the property market. These factors include property values, inflation, interest rates, demand and supply, mortgage rates, unemployment, and population growth.
Key findings from the report highlight that the UK housing market is currently experiencing its sixth period of decelerating growth since 1969. This latest period began with a 3.96% decrease in house prices between July and August 2023. However, historical trends indicate that these periods of decline are typically short-lived, averaging 16 months. This is followed by prolonged recovery phases, where the magnitude of growth often surpasses the preceding declines.
One of the reassuring conclusions of the report is that residential property values have shown resilience over the years. Since 1987, residential values have grown at an average annual rate of 6.8%, which is more than double the rate of inflation. This consistent growth underscores the long-term stability and attractiveness of residential property as an investment.
Interest rates, a critical factor in the housing market, are expected to stabilise after recent hikes. The report suggests that while the market adjusts, the high rates seen before 2009 should reassure that house prices and demand are not solely dependent on low interest rates. This stabilisation is likely to support the forthcoming recovery in the housing market.
To assess the structural demand for housing, the report identifies key contributing factors such as population growth, unemployment rates, and household formation. Despite UK population growth being at its lowest since 2001, the number of households is projected to increase significantly. Between 2018 and 2028, the number of households in England is expected to grow from 23.2 million to 24.8 million, equating to an average of 164,000 additional households per year. By 2043, the number of households is projected to reach 27 million, reflecting a 16.2% increase.
Moreover, UK unemployment is currently close to historic lows, bolstering strong structural demand for residential properties. This contrasts with the higher unemployment rates seen when interest rates were previously high, such as in 2007, suggesting a more robust foundation for the housing market today.
In summary, the analysis indicates that while the UK housing market is undergoing a brief period of decline, a significant and prolonged recovery is on the horizon. Stabilising interest rates and continued demand for housing, driven by demographic changes and low unemployment, are set to underpin this recovery, making the future outlook for the UK housing market positive.
