Property experts make positive assessments ahead of ‘busy autumn’ – data and insight for Q4 of 2024

Cautious optimism the overarching outlook as we head into autumn
The first three quarters of 2024 have seen the property market pendulum slowly swing towards favourable conditions for developers and investors, as cooling inflation and dropping interest rates are met by the arrival of a new government keen to talk up a growth strategy that leans heavily on house building.

Here, we look at some of the key market indicators, and the views of industry experts, to explore how the property sector is shaping up as we dive into autumn and winter.

Fastest recovery rate in Europe
While Britain has faced a period of doom and gloom, with high interest rates and a ‘cost of living crisis’, the prevailing winds look broadly positive for the nation – especially when it comes to property.
Market data indicates that the UK’s commercial real estate market is recovering quicker than the rest of Europe.
Driven in part by political stability, UK transaction volumes rose seven per cent, while volumes across the continent have remained stagnant, according to MSCI.
This is likely to create a tantalising environment for external investors that are now seeking to utilise large cash reserves that have been built up over recent years.

The K-shaped recovery
While commercial property has experienced a brutal two years following the ill-fated ‘mini-budget’, many analysts believe that the improved performance across the first half of 2024 should continue into the autumn.
Aviva Investors published a paper in July presenting data that indicates that the market is finally on an upward trajectory but stressed that this is not equal for all assets.
They state that a ‘K-shaped’ recovery is taking place, with lower-risk, high quality real estate performing well, while other assets face challenges caused by capital expenditure needs and occupier risks.

UK property market set for busy autumn
A ‘busy autumn’ is expected for the UK property market following an interest rate cut from the Bank of England. A surge in home listings is creating more opportunities for buyers, though the increased supply is likely to put downward pressure on prices.
According to official data and analysis from the likes of the Financial Times, a myriad of factors look set to create momentum within the sector:

• Home listings are up 14% compared to 2023, reaching a seven-year high as market activity rebounds.
•  Interest rate cuts, with more expected, could drive a 10% rise in home sales by the end of 2024.
• House prices increased by 2.7% year-on-year to June, with an average property priced at £288,000.
• Mortgage rates have dropped, although affordability does remain tight, with mortgage costs now consuming 39% of median full-time salaries.
• Analysts expect increased transactions, but price growth will likely remain subdued as buyers face constrained budgets.

Academics quell fears of a bubble
The topsy-turvy nature of the British property sector, which has been destabilised over the past five years by a combination of political decision-making and the Covid-19 pandemic, has led to some fears that there could be sector specific bubbles in areas that have experienced rapid growth.
However, analyses from academics at Bayes Business School should serve to reduce fears for investors and developers.
In an article published in the Journal of Financial Stability, Professor Sotiris Tsolacos said: “In the aftermath of high inflation, our research suggests that the main commercial real estate sectors are most likely not experiencing a price bubble.
“However, monthly price monitoring in the commercial markets is even more important during a time of uncertainty and flux. The research also shows that anyone monitoring the health of commercial real estate markets needs to use the most appropriate indicators for each sector.”
They identified that although the distribution warehouse sector had experienced a post-covid price bubble, prices have gradually returned to more sustainable levels.

Final word
The prevailing opinions of many industry experts is that a period of growth looks set to return for British commercial property, after a challenging few years for investors.
While a sustained ‘inflection’ is far from guaranteed, the noises from many industry experts represent a ray of optimism for the sector’s future.
This news piece was curated by BloomSmith, the UK’s leading provider of unsecured VAT bridging loans on commercial property transactions.