The UK housing market has been experiencing a significant decline in home sales this year, primarily due to high mortgage rates imposed by the Bank of England. However, according to James Green, the investment director at deVere Group, an independent financial advisory and asset management company, the market is expected to rebound in the first quarter of 2024. As inflation rates gradually decrease and the Bank of England eases its interest rate increments, the pent-up demand in the housing market is likely to be unleashed, creating attractive investment opportunities for interested buyers.

Pent-Up Demand Will be Released

The housing market in the UK has suffered a sharp decline in home sales throughout this year, resembling a fall off a cliff, as described by James Green from deVere Group. The primary factor contributing to this decline is the stubbornly high mortgage rates imposed by the Bank of England in an attempt to tackle soaring inflation. In October of this year, inflation reached a peak of 11.1%, dropping slightly to 6.8% in July. Although this decrease is positive, the current inflation rate still exceeds the Bank’s target of 2%.

To address the inflationary pressures, the Bank of England has been raising interest rates aggressively. It is expected that next month, these rates will reach their peak at 5.5%. Unfortunately, the consequence of such increases is a weakening demand in the housing market. Higher borrowing costs discourage potential buyers, which further dampens the already struggling sales figures.

However, towards the end of this year, Green believes that the Bank of England will become increasingly concerned about the negative impact of higher borrowing costs on the economy. To prevent a prolonged recession, it is anticipated that the Bank will take measures to slow down the interest rate increments. This adjustment in monetary policy is projected to result in a release of pent-up demand, leading to a rebound in the housing market starting in the first quarter of 2024.

According to deVere’s property investment division, this anticipated rebound in home sales presents an excellent opportunity for potential investors – “Now that inflation is gradually dropping back from generational highs, the central bank will be more likely to be persuaded to pause its rate hike agenda, which will boost the UK’s housing market. As rates begin to fall, there will be some decent property investment opportunities in the UK that investors will be keen to seize.”

Conclusion

Despite the challenging conditions observed in the UK housing market this year, there is hope on the horizon. Independent financial advisory firm, deVere Group, suggests that the decline in home sales will start to reverse in the first quarter of 2024 as inflation rates decrease and the Bank of England adjusts its interest rate increments. This projected rebound in the housing market is anticipated to unleash pent-up demand, creating exciting investment opportunities for those interested in the property market. As interest rates fall, potential investors should keep an eye out for the upcoming opportunities that may allow them to capitalize on the expected recovery in the UK housing market.