Is It Worth Buying Real Estate in 2024?

As we move further into 2024, the question on many minds is whether this year presents a favorable opportunity to enter the world of real estate investment. With recent significant changes in the UK housing market, marked by sharp fluctuations in property prices and successive adjustments to interest rates, deciding to purchase real estate has become a more complex task.

In this article, we will examine the current situation, including recent housing price trends and the rental market.

Property Prices Are Falling at a Considerable Pace

The UK real estate market is experiencing significant decline, with recent data showing the fastest annual drop in property prices in the last 14 years. This decline is linked to higher interest rates, making it more difficult to obtain mortgages for home purchases.

A recent Nationwide report shows a notable year-on-year decrease of 3.8% — the sharpest since the global financial crisis in 2009 — compared to a 3.5% drop in June.

The average house price in the UK is now £260,828, which is 4.5% below the peak in August last year. July showed a slight drop of 0.2% compared to the previous month, according to RWinvest data in the UK.

Thirteen consecutive interest rate hikes by the Bank of England since December 2021 to combat inflation have been the main cause. Another increase in August, from 5% to 5.25%, further tightens the real estate market, reflecting the bank's commitment to fighting inflation.

What does this mean for real estate investors?

If you are entering the market, you will find properties below their usual market value. If you already own real estate and plan to sell, it might be wise to wait until prices return to previous levels. According to Savills, property prices may rise by 6.2% by 2026. Thus, a long-term investment strategy could lead to substantial capital growth, especially considering the growing population of the UK.

Rental Demand and Rent Costs Reach Record Levels

If you are a real estate investor with rental properties, you're in luck.

Since 2022, demand for rental properties has increased by 23%. Rental requests have risen by 46%. Meanwhile, the number of homes has decreased by 38% compared to the five-year average. Moreover, tenants are more often agreeing to tenancy agreements before viewing the property — a struggle for flats is also becoming more common. Why not explore our specialized section on architecture or interior design ideas.

As a result, the demand for real estate has driven a sharp rise in rental prices. Homelet reports the average monthly rent in the UK at £1,299 — a figure never seen before on the real estate market. Thus, new investors can achieve significant rental income that surpasses what they would get from buying property after the market recovers. More specific UK statistics can be found at Statista, as well as on the UK interest rates chart.

Buying Real Estate Before Completion for Greater Capital Growth

If you are new to real estate investment, you may not be familiar with buying before completion.

In essence, off-plan property is purchased directly from the developer project before it is built as a strategy prior to its completion. Developers require capital to finish construction and offer properties to investors at a discount — typically around 5% or 10% below market price. Investors can save tens of thousands of pounds on off-plan properties that will appreciate in value as they approach completion.

Then investors can sell the property for a profit or rent out the completed real estate to receive regular rental income. Additionally, investors can be confident that the property will meet new government EPC requirements.

If you buy real estate before completion now, the price may grow even more according to Savills forecasts than if you had invested earlier.

Conclusion

In conclusion, the decision to invest in real estate in 2024 lies at a crossroads of opportunities, shaped by fluctuating market conditions. The decline in property prices offers an opportunity for savvy investors to enter the market at a favorable time, with potential for significant returns over time. It should be noted that research by companies like Britannia estate agents highlights growing interest in foreign real estate investments.

The booming rental market strengthens this outlook, supported by changing tenant preferences and supply constraints. For those open to innovation, buying real estate before completion offers a dual advantage — a discount at purchase and future appreciation in value.