The outlook for the UK housing market has improved thanks to falling inflation and growing consumer confidence, and the north west continues to lead the way when it comes to house prices.
So far this year, UK house prices have increased by a net total of 1.1%, according to Nationwide’s figures, which is better than many in the industry had expected when making market forecasts at the end of last year. As such, Savills has just revised its five-year outlook, and things are looking brighter for 2024.
The latest Bank of England announcement yesterday (9th May) that the base rate would be held again at 5.25% may not have been the news many mortgage holders were expecting. However, mortgage rates remain lower than the beginning of the year, and analysts are still expecting the base rate to fall this year.
In other economic news, it was revealed today that UK GDP increased by 0.6% in the first quarter of this year, which was the strongest quarterly growth since 2021 and better than forecasts had predicted.
Still, the UK housing market remains “price sensitive”, and to this end it is the more affordable markets that tend to stay better afloat than the high-end places such as London and the south east. In a continuation of a trend we have been seeing for some years now, the north west is one of the most resilient housing markets.
North west top for growth
From a property investment perspective, many parts of the north west have been firmly on people’s radars for a number of years now, as the region has far surpassed London in terms of performance. The rental market in the north west is also extremely strong, generating some of the country’s highest yields.
According to the latest predictions by Savills, this part of the country is expected to see cumulative house price growth of 28.8% in the five-year period between 2024 and 2028. Broken down, this means house price growth of 4% in 2024, 4.5% in 2025, 5.5% in 2026, 6.5% in 2027, and 5.5% in 2028.
While each specific location in the north west will follow its own performance path, this means that for investors or buyers who are targeting areas with the highest potential for capital growth, this is the most promising part of the country right now.
In terms of where to invest, the key cities in the north west are Manchester and Liverpool, which have both been rated as top locations for landlords. Outside this though, a number of smaller towns and cities have also been catching investors’ attentions, such as Stockport, Preston, Bolton and Salford.
Yorkshire and the Humber another key target
Next on Savills’ regional breakdown of house price predictions is Yorkshire and the Humber, with the second highest price growth forecast at a cumulative 28.2% in the five-year period. Broken down, this equates to 3.5% growth by the end of 2024, 4.5% in 2025, 5.5% in 2026, 6.5% in 2027, and 5.5% in 2028.
It follows a very similar pathway to the north west in terms of growth prospects, demonstrating that the two regions have a number of similarities in their housing markets, including below-average pricing in many areas, strong rental demand, and a promising pipeline of future regeneration and transport improvements that are set to make many areas much more appealing.
As the largest cities in Yorkshire and the Humber, the likes of Leeds and Sheffield are popular investment locations, alongside smaller cities and towns such as Hull, Doncaster and Bradford.
A less volatile market
Lucian Cook, the head of residential research at Savills, said: “The outlook for 2024 has improved since our last [November 2023] forecasts as mortgage costs have nudged down slightly and are much less volatile.
“The outlook for economic growth has also slightly improved, pointing to relatively modest house price growth this year, with greater potential over the following few years.”
He added: “The highly competitive nature of the mortgage market has meant that lenders have fairly aggressively priced in the prospect of cuts in bank base rate, causing buyer confidence, and prices, to recover somewhat.”
