A Landlord’s guide to house prices: Property price forecast for the next 5 years
Navigating the world of property investment can be daunting, especially for new landlords. Whether you've become an accidental landlord through inheritance or you're venturing into property investment with some financial stability, understanding house prices and their forecast is key to your success.
In this guide, we’ll break down property prices and give you insights into what the next five years might look like, ensuring you feel confident in your journey as a landlord.
Why are house prices important for Landlords?
The price of a property not only affects how much you can charge in rent but also your long-term return on investment (ROI). Rental yields and property values go hand in hand. By understanding the forecast for property prices, you can plan effectively, to ensure that your rental income covers your mortgage, and position yourself to grow your portfolio in the future.
UK property price trends: What’s happening now?
The UK housing market has been through several changes in recent years, with rapid price increases and interest rate fluctuations. During the first 7 months of 2024, house prices have risen by 1.4% with the average UK house price standing at approximately £266,400 as of July 2024 (published in August 2024 – source Zoopla House Price Index: August 2024).
This rise has been driven by several factors, including:
- A shortage of housing supply
- Strong demand, especially post-pandemic
What can we expect over the next five years?
Experts predict that UK property prices will continue to rise, albeit at a slower pace compared to previous years. According to (https://www.statista.com/statistics/376079/uk-house-prices-forecast/) the forecast is as follows:
Year projected average price increase (%)
- 2024 - 2%
- 2025 - 3%
- 2026 - 2.5%
- 2027 - 2%
- 2028 - 1.8%
These modest increases suggest a steady market, providing landlords with the opportunity to grow their investments without the fear of sudden market crashes. To put this into a real-life example, a property worth £250,000 in 2024 could see an increase as follows should the projections come to fruition:
- 2025 - £257,500
- 2026 - £263,937
- 2027 - £269,216
- 2028 - £274,062
However, regional variations are expected, with the North of England and Wales potentially seeing stronger growth compared to London and the South East.
What factors could influence these predictions?
While the above numbers provide a general forecast, several factors could impact house prices in the coming years:
- Interest rates: Changes in mortgage interest rates could affect affordability and thus, demand.
- Government policy: New tax regulations, incentives for first-time buyers, or changes to landlord laws could shift the market.
- Economic conditions: The broader economy, including inflation, employment rates, and GDP growth, will have a direct influence on the housing market.
What does this mean for you as a Landlord?
For landlords, understanding these projections means:
- Rental income stability: With prices predicted to rise steadily, landlords can expect stable rental yields, helping ensure mortgage repayments are covered.
- Opportunity for growth: The slow yet steady rise in house prices offers an opportunity to build equity over time, which could be reinvested into growing your property portfolio.
- Regional opportunities: Consider investing in regions where property prices are expected to rise more rapidly, such as the North of England, where rental yields are often higher than in London.
Final thoughts
Property investment can seem complex, but by understanding house price forecasts and being prepared for potential changes, you can navigate your landlord journey with confidence. At Andrews, we are here to guide you every step of the way, ensuring that your rental property is not only a source of income but a solid investment for the future.
Ready to learn more about your property’s potential? Contact us today, and let us help you make the most of your investment.
