The first half of 2024 has been one of recovery for Great Britain’s housing market, with house price growth returning to positive territory. Small price falls have been replaced by annual price growth of 1-2%. Generally, it’s more affordable areas of the country which have seen the most price growth this year, as higher interest rates inhibit the ability of some buyers to purchase in more expensive places.
The North of the country has seen the most price growth, with values increasing between 2-4% so far this year. This reflects the more limited stress higher interest rates have put on homeowners. Meanwhile, in the more expensive South, prices have slipped back, particularly in London. London homes fell in value by an average of 4% over the last 12 months to an average of £505,000.
The next cycle
Higher mortgage rates have put the breaks on the current house price cycle. However, with an interest rate cut expected in August or September, we expect this to kickstart the beginning of a new cycle, led by London and the South. We can already see signs of these markets heating up, with a higher share of homes selling above their asking price in London than the rest of the country this year, marking the first time since 2016 that the capital has outperformed on this metric.
There remain large numbers of would-be first-time buyers who have faced 10 years of pre-pandemic rental growth in the space of 24 months keen to swap their landlord for a lender. While falling mortgage rates will keep a cap on rents, they’re likely to bump up the pace of house price growth.
Rental market
In the rental market, growth rates are stabilising. The cost of a newly let home in Great Britain rose to an average of £1,337 pcm in May 2024, 6.3% more than the same time last year. This marked the third month in a row where year-on-year increases averaged around 6%. Meanwhile, rental growth for tenants renewing their contracts continued to rise, with average renewal rents up 8.8% year-on-year in May from 8.3% in April.
Inner London was once again the only area to see rents fall on an annual basis (-2.3%), for the second month in a row. The average tenant here agreed to rent a new home for £3,003 pcm in May, the lowest level for 14 months and £171 pcm cheaper than in November 2023 when rents in Inner London peaked. There were 20% fewer new tenants looking to rent a home in Inner London compared to the same month last year, the largest annual fall in any region.
