Real estate market in the UK - statistics & facts
The UK property market has experienced significant fluctuations in recent years, with notable increases in housing costs and a worsening sentiment in the commercial real estate market. In the residential sector, soaring house prices, mortgage rate hikes, and deteriorating affordability affected housing transactions. Meanwhile, the commercial real estate market suffered a notable decline in the value of investments due to economic uncertainty and market shifts affecting the major asset classes: offices, retail, and industrial.
Despite these challenges, a decline in inflation and the recent interest rate cuts suggest an improving outlook. As the economy recovers, the commercial property market is expected to benefit from improved occupier demand, while lower mortgage interest rates will boost the housing market.
What drives the UK property market?
Although investments have declined since the peak in 2021, the UK remained the largest commercial real estate market in Europe in 2023 and one of the most popular destinations for cross-border investment worldwide. The UK’s diverse economy and London’s significance in global trade are crucial factors driving foreign direct investments and demand for real estate. Furthermore, the country’s mature listed real estate market makes it attractive to portfolio investors. Despite Brexit, the UK has managed to maintain a leading position on the global real estate landscape. According to industry experts, the sector is expected to continue to exhibit growing rents and capital values in the next five years. According to a May 2024 survey, industrial real estate shows the strongest prospects, with rental growth outperforming the industry average by one percentage point per annum and capital values growth growth, by 1.5 percentage points per annum by 2028.Recent developments in the UK housing market
The UK housing market has grown continuously over the past 25 years, with only two notable corrections in house prices since 2000: the global financial crisis from 2007 to 2009 and the cost-of-living crisis in 2022. Although demand for housing has been high, the market’s growth is muted by supply and affordability constraints. Buying a home has become increasingly unaffordable for an overwhelming share of professionals in the UK since 2020. People in the managers, directors, and senior officials were the only occupational group where the mortgage payments for the typical first-time buyer home amounted to less than 30 percent of take-home pay. This decline in affordability has been exacerbated by the dramatic increase in mortgage borrowing costs since 2021 and is reflected in a falling number of house purchases.Despite these challenges, a decline in inflation and the recent interest rate cuts suggest an improving outlook. As the economy recovers, the commercial property market is expected to benefit from improved occupier demand, while lower mortgage interest rates will boost the housing market.
