The Impact of Economic Factors on the UK Property Market in Q1

Sales Momentum in Q1 2024: A Resilient Return

The property market in Q1 2024 has seen a significant uplift in activity, with sales agreed increasing by 15% compared to Q1 2023. This rebound is notable given the economic headwinds faced in the previous year. The report highlights that transactional levels return to those seen in 2022, before the economic disturbances caused by the Truss/Kwarteng tenure and associated mortgage affordability challenges. This recovery in sales momentum underlines the market's capacity to recover swiftly from temporary downturns, a testament to its inherent strength and the underlying demand for residential properties.

Price Per Square Foot: Reflecting Market Confidence

The UK's average price per square foot has increased by 21.4% over the last five years despite a slight decline of 1.1% from last year. The current average stands at £329 per square foot. This growth trajectory, especially in regions like Wales and Northern Ireland, which have seen the most significant increases, indicates sustained consumer confidence and a willingness to invest in property despite fluctuating economic conditions.

Interest Rates and Mortgage Approvals: A Balancing Act

The resilience of the property market is further illustrated by its reaction to interest rate changes. The Bank of England's base rate adjustments have been crucial, with a forecasted decline from 5.25% to around 4% by June 2025. Such predictions help stabilise the mortgage market, as evidenced by a 40% increase in approvals for house purchases in February compared to the previous year. This increase suggests that while there is a cost associated with higher rates, the market's fundamentals, supported by a strong labour market and rising real incomes, continue to encourage home buying.

The Economic Context: Navigating Through Challenges

Recognising the broader economic context in which these market dynamics are unfolding is essential. The UK's property market's ability to "shake off a subdued 2023" and navigate through "inflationary pressures, elevated interest rates, and general cost of living challenges" is remarkable. The report's assertion that "the risk that higher mortgage rates filtering through to homeowners will cause more substantial problems is low" supports this view, providing a reassuring outlook for the sector's future.

The "Property and Homemover Report Q1 2024" presents a UK property market that demonstrates remarkable resilience and adaptability while sensitive to economic changes. The market thrives by effectively balancing the impacts of economic factors like interest rates and inflation, offering valuable insights into how sectors can withstand and even capitalise on challenging economic times. This resilience reassures stakeholders and attracts new participants looking to invest in a robust and dynamic market.

About Farrell Heyworth

For those looking to read more about the UK property market, Farrell Heyworth offers a wealth of resources and expertise. As one of the leading estate agencies in the North West, we provide comprehensive services that cater to all aspects of buying, selling, and renting properties.