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Market Insights: Trends & Insights 2024

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Our Market Insights reports investigate key trends and structural changes in UK prime housing markets. As part of our ongoing collaboration with real estate researcher, Yolande Barnes, our annual ‘Trends & Insights’ report takes an in-depth look at factors influencing the future value of the UK’s prime real estate in both London and the country. How do prime property markets differ from mainstream markets and why? What will be useful in considering the years ahead for these markets? This edition covers considerations ranging from inflation and interest rates to industry-specific trends and political factors. The key findings are below:

  • Prime markets. Prime properties in London and the country behave differently than mainstream markets and are expected to outperform in the longer term due to scarcity of high-quality stock. Prime markets are influenced by wealthy buyers and are less reliant on mortgages (with around one-third being cash buyers); they see the first influx of fresh cash after slumps, often led by international buyers. London’s relative position in the global market is still strong despite declines in financial activities post-Brexit.
  • Inflation. Inflation in the UK is higher than before the Russia-Ukraine conflict, but forecasts suggest it may fall back to target levels (average forecast for CPI in 2024 is 2.6%). But geopolitical issues, such as the Ukraine- Russia war, Middle East tensions, and China’s ambitions for Taiwan, could impact inflation through increased oil prices and disruptions to supply chains, derailing market expectations of lower interest rates.
  • Interest rates. Expectations of ‘higher for longer’ interest rates are receding in response to falling inflation; bond markets are already pricing in falling rates, affecting asset pricing, especially in real estate. But there may be profound changes to longer-term central bank policies: regular, very shortterm demand-side shocks may require central banks to find a stable, long-term interest rate. Where this figure will settle is a major consideration for the value of all assets, including real estate.
  • Economic growth. The UK faces headwinds like war, geopolitical tensions, economic slowdown in China, and political uncertainty, affecting economic growth. GDP growth forecasts for 2024 range from -0.7% to 1.9%, with an average forecast of weak growth at 0.4%.
  • Demand-side trends. Rents have risen significantly (11.9% in 2022, 9.7% in 2023) due to an increasing demand for specific types of housing post-pandemic. The rise in Asian economies is contributing to demand for prime property in international markets. There is potential for Asian buyers to explore and invest in older, established districts of London as well as to venture into the countryside.
  • Supply-side trends. There’s a difference between housing stock and actively marketed supply, with most available stock being second-hand. Rates of turnover in different markets impact value, with unique and heritage properties appearing in the market less frequently. Sellers can constrain supply by withdrawing or holding out for specific conditions, contributing to ‘phantom stock.’
  • Political factors. Leasehold reform has potential impacts on property values and market confidence. Non-domiciliary tax status changes may have an impact on demand, particularly in central London. Anecdotal evidence suggests that some will use the upcoming election as an excuse to adopt a ‘wait and see’ approach but that activity will resume as soon as the election is over.

Read and download the full report here.