March 19, 2024

The future of real estate: our predictions

12 months is an incredibly long time in the world of real estate. Global events continue to dictate fluctuations in prices, which has contributed to a lot of uncertainty for both buyers and sellers. On the whole, we saw house prices fall slightly this year, but average values remain well above pre-pandemic levels. So what can we learn from 2023 trends as we look ahead to the new year and beyond? Here are our predictions for what the future might hold.

House shopping continues to remain online

The internet has long been a valuable tool for buyers going through the house hunting process. But especially since the pandemic, digital interactions have had an even more prominent role in the process, and it’s vital that companies are prepared to facilitate this. In particular, modern home buyers are displaying a preference for using a mobile device when researching properties. In fact, 2021 statistics show that almost 60% of traffic on agent websites is coming from mobile devices.

With this obvious and ongoing shift to online house hunting, it’s more important than ever for developers to have the right marketing collateral in place on their digital channels. In particular, websites and social media platforms should be leveraged to help capture the attention of your target market. In the incredibly saturated digital marketspace, it’s important to do all you can to stand out from the crowd; this is where virtual staging and property CGI can be so influential. In addition, virtual reality is another way to improve the house hunting experience for buyers, providing customers with a more immersive insight into a property to supplement still images and 360º virtual tours.

Utilising the latest tools in architectural visualisation will not only help to show off your developments in the greatest detail, but you’ll also be positioning yourself as a progressive, credible brand. Both of these factors can help to boost interest in your projects, so having the right digital imagery in your marketing toolkit is essential.

Urban investment will continue to grow

The benefits of city living are certainly not being lost on 21st-century home buyers. In fact, urbanisation is happening all over the world, with a higher proportion of people deciding to live and work in metropolitan areas. Even with the boom in remote working brought on by the pandemic, cities continue to be desirable for homehunters. This comes despite urban property prices continuing to rise, particularly in the most expensive areas like London. Rental prices in cities are also rising, but London rates are doing so more slowly than other, more affordable parts of the country.

Away from the capital, there appears to be significant opportunities for investors and developers to cash in on more affordable house prices in the country’s regional cities. For example, in Derby, the average house price currently sits at around £235,000, with rents expected to rise by 12% by 2026, while house price growth predictions are at 17.5% over the same period. In addition, the government has set out its stool in pledging more funds to urban growth over the next decade, which is likely to bring about more investment as urbanisation trends continue.

The rental market may plateau

Renting remains the preferred option for lots of people, due mainly to the affordability factor and added flexibility of this type of agreement. However, data suggests that the growth in the rental market has slowed down and is likely to have peaked. YoY rental growth figures show a 9.7% rise in UK rents, 2.2% lower than the 11.9% recorded in 2022. Developers and investors can expect to see this slowdown continue as we head into 2024, with the growth likely to plateau.

There are several key reasons behind the growth of the rental market in recent years, including a resurgence in global travel post-pandemic, and the rising costs associated with home ownership. However, the impact of these factors, among several others, has now started to level off, while other drivers – including a slight reduction in the cost of borrowing – are making buying a potentially more attractive option. This is especially true for first-time buyers looking to get a foot on the property ladder.

However, for developers and landlords, these figures aren’t necessarily cause for alarm. In fact, for the last 18 months, demand has remained in the double digits, and we’d expect this trend to continue. So, even though demand is slowing, it still remains higher than the recent historical average. In fact, UK rental demand is still 32% above the 5-year average.

Homeownership could rise as people believe interest rates may have spiked

In the UK, wages have risen over the past year, with 2023 bringing one of the most significant hikes in average pay seen across the last couple of decades. In addition, the Bank of England kept the base interest rate at 5.25% in December 2023, and it’s expected to remain unchanged until the second half of 2024, at which point experts expect a lower rate to be set. With lenders feeling that interest rates could have peaked at the current level, mortgages are likely to be more affordable for homebuyers going forward.

But, as predicted, the equation is slightly more nuanced than this. There are so many other factors at play beyond wages and interest rates, including the economy’s stagnant growth and the cost of living strain that’s being felt across the country. So, while we may have seen interest rates and the cost of borrowing for a mortgage peak at the end of 2023, this doesn’t necessarily mean buyers will be chomping at the bit to enter into a mortgage agreement.

Flats continue to rise in value quicker than houses

Flats have been getting more expensive throughout 2023. In fact, in more than a quarter of local authorities across the country, flat prices have been rising at a faster rate than houses. With costs rising for developers and a growing number of regulations being placed on new-build projects, we’re seeing less of all property types entering the market than we have in recent years.

This slowing down in supply will see higher competition, which could end up pricing lots of first-time buyers out of homeownership. But, this demographic isn’t just competing amongst themselves; lots of buyers in the market are demonstrating a preference for smaller, more affordable properties as the pursestrings tighten in the current economic climate. With larger deposits becoming harder to come by, flats and small apartments are a more realistic option for a wider range of buyers. The growing demand for this style of property could see prices continue to rise, particularly in the early stages of 2023.

Predicting the future

In what is such a volatile market, it’s almost impossible to predict with any certainty how buyers and developers will behave in 2024. However, there are lots of positive signs that suggest we will see continual growth in both the buying and rental markets as we head into the new year.

If you’re looking to bring a property to market next year, get in touch with us today to find out what professional architectural visualisation could do for you and your project.

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