As we move forward into 2024, there seems to be a sense of optimism in the air. With UK inflation on a downward trend, the Bank of England (BoE) keeping the base rate at 5.25%, and several significant sporting events on the horizon, including the Men’s UEFA Euro football tournament, the T20 Cricket World Cup, and the Olympic Games in Paris, there is a lot to look forward to.
However, 2024 is expected to pose some challenges, owing to global political events such as the US Presidential election, and ongoing conflicts between Russia and Ukraine and between Israel and Hamas. Closer to home, Chancellor Jeremy Hunt’s spring budget announcement on 6th March is seen by many as the government’s last-ditch effort to win voters ahead of the general election that must be held by January 2025.
According to the Organisation for Economic Co-operation and Development (OECD), the UK is likely to experience sluggish growth in 2024, with GDP growth projected to rise only slightly from 0.5%, seen in 2023, to 0.7% this year, before climbing to 1.2% in 2025. On a positive note, PWC predicts that the UK will be the fourth best performing G7 economy relative to pre-pandemic levels; despite weak projected growth 2024 will see the UK outperform France, Japan and Germany with real GDP around 2.7% higher on average than in 2019.
The UK is currently grappling with sticky inflation, which is above the BoE target of 2%. Many experts predict that inflation could fall much faster than anticipated, getting closer to 2%, but this does depend on how volatile global energy prices become as a result of the conflict in the middle east. This could prompt the BoE to adopt a cautious approach and avoid any sudden moves to reduce the base rate. It is possible that the rate could remain at 5.25% throughout the first half of 2024. However, in a recent poll conducted by The Times newspaper, where economists were asked to give their forecast for the year ahead, 42.5% of the respondents predicted that the Monetary Policy Committee (MPC) would cut rates twice in 2024; furthermore, a recent announcement by the US Federal Reserve indicated that they intend to drop rates by 0.75% over 2024.
Consumer confidence could also improve as low-income households benefit from the National Living Wage (NLW) increasing to £11.44 per hour from April, along with easing energy and food inflation throughout 2024, and increased government support in the form of housing benefit and a third cost of living payment.
So, what does 2024 look like for the Buy-to-let Mortgage Industry? According to UK Finance, Mortgage Market forecasts for 2024-2025 show that the buy-to-let market is forecasted to contract by 13%. However, on the optimistic side there could also be a gradual recovery of house price growth and an increase in housing transactions as affordability improves due to wage inflation and lower interest rates. The mortgage rates may also decrease depending on the BoE’s policy actions.
There are a few things that, as an industry, we need to keep an eye on in 2024, including a Renters Reform bill potentially becoming law, and renewal of the Decent Home Standard for which no definitive implementation date has yet been set. And finally, the impact of the general election – if the Labour Party win, would they move forward with changes to EPC legislation which are currently paused by the incumbent government?
Just to round up, in 2024 there are several ‘known unknowns’ that could change the trajectory of the UK, such as volatility in global energy prices and the forthcoming General Election, however, overall, the outlook is far rosier for 2024 than expected twelve months ago.
Why is it crucial for landlords to continue their EPC improvements efforts?
