Will Rent Prices Go Down in 2024?

The UK property market and the rent prices in the UK is always in flux, either growing or shrinking, as with most other markets. And 2024 does not appear to be any different. Investors must be well informed to make smart decisions amidst house price growth, changing economic policies, and rising rental demand across regions. As this year moves into the final months, a pressing need develops to understand the forecast for house and rent prices and the key elements shaping the market into 2025.

Economic Conditions: Inflation, Interest Rates, and the Rent prices

The UK economy has been hit with considerable blows in 2024, with both inflationary pressures and high interest rates taking a heavy toll on potential buyers. The interest rate has just been cut to 5% by the Bank of England from its peak of 5.25%, which would likely improve mortgage affordability. Still, most first-time buyers have continued to suffer high borrowing costs. With interest rates stabilising, some market analysts believe, confidence in the housing market could be restored ahead of 2025. Overall, the house and rent prices growth is expected to stay modest, with some forecasting rises of 2-3%, while others predict slight falls by year-end.

The UK housing market and its rent prices are still highly regional. This has resulted in several cities in the North and the Midlands doing well with continued growth, but London and the South East are still behind. Cities like Manchester, Leeds, and Birmingham will see the house and rent prices growth of 3-6% in 2024 and beyond, owing to the robustness of local economies and regeneration, alongside soaring demand for rentals. In fact, these cities are expected to outshine the pricier southern regions where affordability remains constrained. For investors looking to capitalise on growth, regional hubs are the future.

Supply and Demand: Housing Shortages Driving Prices

At a time when the government is trying to get more supply into the housing market, the UK is still short in terms of the availability of truly affordable homes across the nation. The annual target of 300,000 new homes across the country does not look like it is going to be met, and all the while, the construction industry falls behind in areas experiencing the largest population growth.

This trend is likely to continue, and with it, the upward pressure on property and rent prices in many urban centres. This supply-demand imbalance is one important factor an investor should consider in making decisions in property investment, especially in those cities where population growth is high, and the availability of housing is limited.

In 2024, priced out from ownership, the serious momentum of the rental market will take place. Large student populations and growing professional sectors offer cities like Leeds and Liverpool a rental yield of more than 6-7%. Hence, that would make buy-to-let properties an attractive option for investors looking for steady returns even in a rising interest rate environment. Given all these factors, and likely to continue to be in high demand-particularly in major cities with job growth and regeneration projects – rental property investments appear a sound strategy for the foreseeable future, too.

Cities to Watch for Investment in 2024-2025

• There are numerous UK cities set to perform well over the next two years thanks to growing economic prospects, a lack of homes to meet demand from renters, along with new infrastructure and regeneration projects. Here is the cream of the crop.
• Manchester – With its high-growth tech industry and further regeneration in the pipeline, Manchester remains one of the focal points of any property investment portfolio. House prices will keep on increasing at a stable pace, hence offering both capital appreciation and rental yields.
• Birmingham – The HS2 rail link, along with major projects for regeneration, makes Birmingham a very appealing market. Property prices are likely to increase, hence being a pretty good option for long-term growth.
• Liverpool – Offering competitive property prices and high rental yields, Liverpool is a key focus for many buy-to-let investors looking for high returns.
• Leeds – With its growing financial and digital sector, Leeds has emerged as the second most important city for property investors, given that house and rent prices are expected to carry on growing for at least the next few years without any marked slowdown in sight.

Outlook Beyond 2025

Looking ahead, the longer-term outlook is one of steady growth for the UK property market, with a particular emphasis on the North and Midlands. Government initiatives such as investing in infrastructure and the Levelling Up agenda will continue to drive growth across these regions. Sustainability and eco-friendly developments are also high on the agenda, which will shape the property landscape in years to come, as investors target those cities integrating green infrastructure and smart technologies.

Investors will, therefore, have the above-average likelihood to secure appropriate short- and long-term returns by targeting regions with solid economic fundamentals, good infrastructure, and where regeneration is underway.

Conclusion

In conclusion, while the UK property market and the rent prices are subject to some challenges, such as high interest rates and low supply, there is still scope for investors to realise promising prospects. Regional divergence, particularly in the North and Midlands, provides some areas of capital growth while growing rental demand offers substantial returns for the buy-to-let investor. Being properly informed and aware of these key trends is at the centre of maximising property investments in the UK as we enter 2025.