Yahoo Finance UK rents to rise faster than house prices
Four-fold increase predicted with steepest rises in London
Great Britain is set to see rents costing more than house prices by 25% over the next four years due to higher interest rates, according to Hamptons.
The leading residential estate agent predicts price falls to stop in 2024, as mortgage rates gradually drop and household incomes grow.
In London, rents are likely to rise faster than other regions across the country by 9% in 2023 and slowly see a decline at just 8% in 2024.
Hamptons said a combination of lower yields and more landlords being reliant on finance will put added pressure on investor profits in the capital.
Soaring interest rates will see a 5.5% price growth across the country putting far more pressure on rents than house prices.
Using the Office for National Statistics (ONS) House Price Index which tracks all completed sales, the property services company reported that house prices are likely to fall by a fairly significant 7.4% compared with 10.6% in 1990 and 16.5% in 2008.
Read More: UK house prices see biggest annual decline since 2009
Across the Southern regions, where it has been reported to be hit hardest with higher interest rates, it will see the biggest price fall this year.
The South West will see a drop by 4.0%, the East of England by 3.5% and South East by 3.0%.
Prices in Wales are expected to also fall by 4.0% where it ranked high for strongest place for price growth of 56% between 2015 and 2022.
Aneisha Beveridge, head of research at Hamptons said: “Despite rising rates and the cost-of-living crunch catching many households off guard, it’s becoming increasingly clear that the house price crash that some forecasters envisioned hasn’t materialised.
“Rather, we expect a minor price fall in 2023 followed by a slower recovery over subsequent years as households adjust to an era of higher rates.”
Aneisha said that predictions of house price falls on paper are minor in nominal terms, however high inflation for other goods and services means that in real terms, the average price of a home will have fallen around 11% between 2022 and 2024.
She said: “This essentially reflects “the correction” caused by higher rates. It’s also why we expect prices to rise again in both real and nominal terms from 2025 as rates fall to their new normal and a new housing cycle begins.”
Higher mortgage rates, worsening affordability and general economic uncertainty have all weighed on price growth this year, according to Hamptons.
It said they are expecting the ONS index to reveal the average property in Great Britain to cost 2.5% less than what it was in the final quarter of 2022.
Hampton’s data, which is based on the ONS House Price Index, revealed that London prices are likely to fall by 2.5% due to slower growth than elsewhere.
2024 is set to see house prices stabilise with 0% annual growth across GB, with affordability being the main denominator for price growth.
As mortgage rates slowly drop and household incomes grow, Hamptons said it expects price falls to stop in 2024.
Many households will feel the squeeze as interest rates remain above 5%. As pay rises across the country for many, more economic stability and improved affordability will mean buyers will look to purchasing homes.
Hamptons figures showed that the average prices in Great Britain will have declined by nearly 10% between the start of 2023 and the end of 2024.
2025 is forecasted to look more promising for the capital as the property market will start to outperform all other regions for the first time since 2015, with 5.0% annual price growth.
Overall, London will see the strongest growth between 2023 and 2026 of 11.5%, while prices in Wales are likely to remain flat.
Watch: UK rents rise 5.3% in the to July
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