Latest news from JLL, the global real estate consulting company, specialising in the provision of real estate services in the UK.
Houses prices expected to rise by 20% in the next five years as lower mortgage rates bring buyers back to the market.
With the October Budget behind us, the outlook for both prices and rents remains positive. The government is forging ahead with its plan to deliver more homes, but it will take some time before we see any real impact on overall supply. Increased government borrowing means the latest inflation forecasts from the Office for Budget Responsibility have come in higher than expected, which could throw some cold water on more bullish forecasts for mortgage rates. But the direction of travel appears to be the same, even if it may take a little longer to get there.
Lack of supply and more competitive mortgage rates are expected to underpin growth in prices over the next five years. Rental growth is expected to exceed inflation and wages over the five-year forecast period, but an increase in activity in the sales market means rental growth is expected to lag price growth, with rents forecast to be 17% higher by the end of 2029.
2024 Outlook
Back in May JLL forecast house prices nationally would rise by 2% in 2024. This was underpinned by a continued resilience and lack of distress in the sales market, with prices holding firm despite the challenge of higher rates and uncertainties in the run up to the election (which at that point we were thinking would take place in the autumn). An early election was seen as a positive for the market, but Budget jitters meant much of that hoped for momentum was lost (or at least delayed).
Looking at the latest government figures (year to August 2024) shows prices have risen 2.8% annually, with more recent Nationwide figures for the year to October at 2.4%. There are obviously a few months to go but we expect year end growth to come in marginally above our 2% forecast. Scotland and the north of England are expected to see higher growth. Higher mortgage rates remained most challenging for more expensive markets in London and southern England, with growth in these regions, as forecast, lower than other areas of the UK this year.
We forecast UK rents would end 2024 4.5% higher annually. The ONS Private Rents Index, which we benchmark against, is still showing growth of 8.4% in the year to August, but new lets data from Homelet data shows average rents were 4.3% higher in September 2024 than they were a year earlier. We expect ONS figures could end the year higher than our 4.5% forecast, but the significant imbalance between tenant demand and supply has levelled off in recent months.
To read the full report visit JLL Residential Forecast 2025-2029