introduction
Recent market analyses reveal that the anticipated dampening effect of high base rates on real estate activity has not materialised. Despite elevated stock levels and high borrowing costs, the UK's real estate market is outperforming expectations, especially in northern, Scottish, and Welsh regions, which have shown significant recovery post-2022 price drops.
Investment opportunities
Regional Variations in Property Investment
While southern regions like Greater London and the South West are still recovering, northern regions have bounced back robustly. This disparity highlights the importance of regional considerations in property investment strategies.
Impact of Rental Market on Real Estate
The UK rental market has seen a dramatic 44.6% increase in rents over the past five years, bolstering the real estate sector. Higher gross rental yields in the North have provided crucial support, suggesting that the rental market underpins property values significantly.
Government Policy and Its Implications
The new government's stance on rental market regulations, including potential rent controls, could have profound effects on both rental and sales markets. Future legislation should carefully consider the critical role of rental income in supporting property values.
Market Prices and Borrowing Costs
Despite a minor 0.2% increase in the average asking price for England and Wales, property prices remain below 2022 highs. With inflation below target, a cut in the Bank of England's base rate is deemed necessary to alleviate the pressure on the wider economy and stimulate investment in new builds.
New Builds and Market Dynamics
High interest rates have stymied investment in new, energy-efficient rental properties, exacerbating the shortage of available rental stock. The number of properties for rent has dropped significantly from 122,000 in July 2019 to 66,000 today, indicating a pressing need for policy adjustments to encourage new developments.
Market Stability and Vendor Patience
Despite the challenging borrowing environment, vendors have shown remarkable patience, with a decline in property price reductions between May and June. The typical time on the market remains reasonable compared to pre-pandemic levels, reflecting a stable market under current conditions.
Regional Trends in Asking Rents
Most regions continue to see positive growth in asking rents, although some areas, such as Greater London and the Midlands, have experienced slight declines. Conversely, regions like Scotland, Wales, and the North East report double-digit annual growth, indicating robust demand.
conclusion
The annualised average asking price growth across England and Wales stands at 0.7%, a significant improvement from the negative growth observed in July 2023. This trend underscores the resilience of the UK real estate market despite economic pressures.
