Is Buying Property a Good Investment?

The UK property market in 2024 is shaping up to be an interesting landscape for investors. With echoes of 2023’s economic instability and a new government in place, investors face a mix of opportunities and challenges.

A robust rental market, characterised by rising demand and increasing rental prices, offers significant investment potential for those choosing suitable properties and locations.

As interest rates begin to decrease, the market is expected to gain momentum. Property prices are projected to continue upward, indicating sustained growth and profitability for long-term investors.

Is buying property a good investment in 2024? Let’s take a closer look at the market, trends and what investors can expect.

Reflecting on the 2023 Property Market

If we look at whether property is a good investment in 2024, it’s essential to reflect on the economic conditions of 2023 to understand the investment landscape.

The past year was marked by significant economic instability driven by global political tensions. These factors led to erratic energy prices and created uncertainty about supply chains, impacting various sectors of the economy.

Notable trends impacting the property market included:

• Bank of England’s Interest Rate Hike

One notable development in 2023 was the Bank of England’s decision to raise its base interest rate by one-quarter of a percentage point. This increase is part of an upward trend that broke the long-standing period of historically low rates following the 2008 financial crisis.

• Current Interest Rates and Investment Opportunities

Prior to the financial crisis, the base interest rate peaked at 17% in the 1980s and reached 6% in 2007. The current interest rate, at 5% in mid-2024, was the first decrease since March 2020.

Current interest rates remain relatively low compared to historical standards. However, interest rates are significantly higher than in the past decade. This higher interest rate environment makes borrowing more expensive, impacting property investment attractiveness.

In the next few years, interest rates are expected to go down in the next few years, and mortgage lenders will start reducing rates on fixed deals.

Is Buying Property a Good Investment? The Market in 2024

Despite economic challenges, property prices have continued to rise, albeit at a slower pace than in previous years. According to recent data, average property prices have increased by 4% year-on-year, reflecting steady, if cautious, growth.

• Impact of Interest Rates on Property Investment

Higher interest rates in 2024 have made borrowing more expensive, impacting potential property investors. The current average mortgage rate stands at around 5.5%, up from 3.5% just two years ago. This increase has led to a slight cooling in the market as buyers reassess their financing options and affordability.

• Regional Variations in Property Prices

Property price trends in 2024 show significant regional variations. In London, property prices have surged by 6% due to continued demand and limited supply. Areas in the North of England have seen more modest growth of around 2% in the last year, highlighting a more balanced market outside the capital.

• Supply and Demand Dynamics

The supply and demand dynamics will continue to shape the property market in 2024. There remains a need for more new housing developments, which has kept prices high. Government initiatives to increase the housing supply have yet to make an impact, creating affordability issues for many first-time buyers.

What are the Key Benefits of Investing in Property in the UK in 2024?

Investment in property in the UK in 2024 remains an attractive option for investors for several reasons.

• Strong Rental Market

The UK rental market in 2024 remains robust, with rental prices increasing by an average of 5% nationwide due to high demand and limited supply​​. This growth is particularly pronounced in urban areas where demand from younger professionals and students is high. Investors can benefit from consistent rental income and the potential for rental price appreciation.

Read more about investing in rental property with our buy to let guide.

• Capital Appreciation Potential

Property prices in the UK continue to rise, with an average increase of 4% year-on-year​. Specific regions like London and other city centres are experiencing even higher growth rates​​. Investing in property in these areas offers the potential for significant capital appreciation over time.

• Diversification and Stability

Property investment provides a tangible asset that can diversify an investment portfolio, offering a degree of stability amid economic volatility. The long-term demand for housing in the UK, driven by population growth and limited supply, ensures that property remains a relatively secure investment​.

How is the UK Property Market Predicted to Grow?

Buying property is a long-term investment and projections of UK property price growth make investing in UK property an attractive option for investors:

• Steady Price Increases Expected

The UK property market is expected to experience steady growth through 2030, with property prices projected to rise by 17.5% by 2026 in some areas​. Nationwide, house prices are predicted to increase by 2-3% annually over the next decade. This consistent growth is fueled by ongoing demand and a persistent shortage of housing supply.

• Regional Growth Variations

Significant regional variations are expected, with cities such as Manchester and Birmingham predicted to see substantial price growth of up to 19.3% and 19.2% respectively by 2027​. These cities are also forecasted to experience the highest rental price growth, with projected increases of 21.6% and 19.3% in the same period​.

• Impact of Government Policies and Economic Factors

The incoming Labour government has plans to address the housing crisis by constructing 1.5 million new homes over the next five years. This includes prioritising brownfield development and ensuring that at least 50% of new homes are affordable.

Is Buying Property a Good Investment Compared to Previous Years?

Investing in property in 2024 presents a mixed bag of opportunities and challenges compared to previous years. The average property price has continued to rise, albeit at a slower pace​.

However, higher interest rates, now averaging around 5%, have made borrowing more expensive compared to the historically low rates of recent years, which may deter some investors​. But the good news is that these rates are expected to decrease.

• What Does the Future Hold?

Regional variations offer lucrative opportunities, especially in cities like Manchester and Birmingham, where property prices are expected to rise by 19.3% and 19.2% respectively, by 2027​​. These factors combined suggest that while the immediate costs may be higher, strategic investments could yield significant returns in the future.

Noteworthy Property Trends in 2024

The UK property market has experienced a noticeable slowdown in 2024, influenced by economic factors and higher interest rates. According to the HM Land Registry, property prices in January 2024 were 0.6% lower than the previous year​.

Major estate agencies like Savills and Lloyds Bank predict property prices will decline by 2-3% by the end of the year, reflecting the market’s cautious sentiment​.

Other market trends are also having an impact on properties:

• Environmental Considerations

The focus on green building and sustainability is becoming a critical factor in property investments. With the UK’s commitment to net-zero carbon emissions by 2050, there’s a growing demand for energy-efficient and environmentally friendly properties.

• Impact of Remote Work Trends

The shift towards remote and hybrid work models continues to reshape the property market in 2024. There remains the trend of people moving away from city centres to more affordable suburban and rural areas, seeking larger living spaces and a better quality of life.

However, many companies are calling workers back to the offices or implementing a hybrid work set-up, which increases demands in cities and areas of commutable distance.

• Changing Demographics

The ageing population is driving demand for accessible housing and retirement communities, while younger generations prioritise urban living with access to amenities and public transport. Investors should be aware of these trends and consider targeting diverse demographic groups to maximise their investment potential​.

Understanding these factors can help investors navigate the evolving property market and make informed decisions in 2024.

Is Buy-to-Let Still Worth It in 2024?

Investing in buy-to-let properties in 2024 has become more challenging due to higher interest rates and changing government policies. So, is buying property a good investment today? Investing in rental properties in 2024 offers several benefits despite the challenges posed by higher interest rates and changing regulations.

Rental potential

• One key advantage is the strong and consistent rental income potential due to high demand and rising rental prices. Rental prices are expected to increase by approximately 5% nationwide, reflecting robust demand across various regions​​. In urban centers like London, rental prices have surged significantly, with a 5.1% increase noted in 2023 alone.
  
• JLL projects that rental prices will grow by 15.9% between 2023 and 2027, highlighting the long-term upward trend in the rental market​​. As a result, landlords can expect consistent rental income and potentially higher returns on their investments over the coming years.

Take a Long-Term View

Investing in property is a long-term game. The Office for Budget Responsibility (OBR) predicts a property price increase of 3.5% by 2027, while Savills anticipates a 7% rise in house prices by 2026.​ These projections highlight the potential for substantial capital gains, making real estate a valuable addition to an investment portfolio​

Is it Worth Buying Property as an Investment?

Property investment has long been considered a stable and lucrative option, but is it still worth it in 2024?

The Pros of Investing in Property

• Consistent Rental Income: Investing in property can provide a steady stream of rental income, especially in high-demand areas. For example, rental prices in the UK are expected to grow by 15.9% between 2023 and 2027, ensuring a reliable income source for landlords​.
  
• Capital Appreciation: Property values increase over time, offering potential for significant capital gains. In cities like Derby, property prices are projected to rise

• by 17.5% by 2026.
  
• Hedge Against Inflation: Property investments can act as a hedge against inflation, preserving the value of your money. As inflation increases, so do property values and rental incomes, maintaining purchasing power.

The Cons Against Investing in Property

• High Initial Costs: Buying property requires a substantial initial investment, including a down payment, closing costs and potential renovation expenses. With average mortgage rates at 5%, the borrowing costs have increased significantly compared to previous years.
  
• Market Volatility: Property values can fluctuate based on economic conditions, potentially leading to losses. Economic instability and changing government policies can affect market dynamics, making property investments riskier​.
  
• Maintenance Costs: Owning rental property involves ongoing maintenance and management expenses, which can reduce overall profitability. Landlords must also navigate tenant issues and vacancies, adding to the complexity and cost.

While property investment presents certain challenges, the potential for significant returns and income generation makes it an attractive option for informed investors.

Is it Better to Save Money or Invest in Property?

Whether to save or invest in property depends on individual financial goals and risk tolerance, but both options have advantages and drawbacks.

Is property a good investment? The Pros of Investing in Property

• Higher Potential Returns: Property investment can offer higher returns than traditional savings accounts.
  
• Diversification: Property investment diversifies your portfolio, reducing overall risk by not relying solely on financial markets. This can provide a stable income stream and potential for long-term capital appreciation.

Cons of Investing in Property

• Liquidity Issues: Property is not a liquid asset, meaning it can take time to sell and convert into cash. This lack of liquidity can be a disadvantage compared to savings accounts, which offer more accessible access to funds​.
  
• Market Risks: Property investments are subject to market risks, including economic downturns and regulatory changes. These factors can affect property values and rental income, potentially leading to financial losses.

Pros of Saving Money

• Safety and Stability: Savings accounts offer safety and stability, with guaranteed returns and low risk. This is ideal for those seeking to preserve capital without exposure to market fluctuations​.
• Liquidity: Savings accounts provide easy access to funds, offering liquidity for emergency expenses or immediate needs. This flexibility is a significant advantage over property investments​.

Cons of Saving Money:

• Lower Returns: Savings accounts typically offer lower returns compared to property investments. With current interest rates, the growth of savings might not keep pace with inflation, eroding purchasing power over time.
  
• Limited Growth Potential: The growth potential of savings accounts is limited, making it harder to build significant wealth over time. Property investments, by contrast, offer greater opportunities for appreciation and income generation​.

What is the Best Age to Invest in Property?

Data shows that many people in the UK buy their first home in their early to mid-30s. According to the English Housing Survey, the average age of first-time buyers was 34 in 2023.

Investing in property at a younger age can provide more time for property appreciation and the ability to leverage mortgage options effectively. Starting early also allows investors to build equity over time, potentially leading to greater financial stability and opportunities for future investments.

The best way to invest in property is when you have the financial means to do so. However, younger people in the UK find it increasingly difficult to buy property due to rising house prices and stagnant wage growth. Additionally, stricter mortgage lending criteria and higher deposit requirements make it challenging for first-time buyers to enter the market​.

There’s no best age to invest in property—whatever age you start, property can make a great investment and deliver numerous benefits in the long term, such as capital appreciation, rental income and diversification of your investment portfolio.

If you’re wondering how to invest money in property—take a look at this article with expert tips on how to get into the property market.

While higher borrowing costs and market conditions pose hurdles to property investment, the consistent rise in property prices and robust rental market offer compelling reasons to invest. Is buying property a good investment? The long-term benefits of capital appreciation, rental income and portfolio diversification make investing in property a worthwhile decision for informed investors​.To find out more about investing in property in 2024, get in touch with our experts.