Resolving residential supply and demand equation crucial to unlock real estate growth in 2024

Stacy Eden, national head of real estate and partner at RSM UK, comments: ‘The extended economic stagnation throughout 2024 will lie heavy on the real estate industry impacting investment, supply and viability of some portfolios. UK growth is only expected to reach 0.5% next year which means interest rates are likely to remain at 5.25% in the first half of the year, only moving to 4.5% by the end of 2024.

‘Continued high interest rates makes financing difficult - squeezing margins and increasing risk for investment; so, we are likely to see a flight to ‘safer’ or low risk investment where the business case stacks up to deliver stable returns. London and South East may feel the benefit of this, particularly in the living sector where residential property and student accommodation will no doubt see growth. There is a feeling that the corner is being turned and with more opportunities for investors, particularly the cash rich, transactions and values will start to head into the right direction towards the second half of 2024.

‘Despite slow economic growth next year, this will deliver some form of continued stabilisation which should result in mortgage rates continuing to fall which is good news for homeowners. However, first-time buyers will still find it tough to get on to the property ladder as rents are still increasing eating into potential deposits; the chronic lack of supply; more landlords are selling up and limited government support provide the perfect storm for first-time buyers.

‘Resolving the supply and demand equation is crucial, and planning reforms are at the heart of this. The shortage of housing is feeding the rent increases, pricing many renters out and, in turn, putting further pressure on the state to provide housing provision. Scrapping local targets has only made this problem more acute. Any movement on this was missing from the Autumn Statement, but it is hoped this will be rectified in the Spring Budget alongside a reduction in stamp duty land tax to bring more liquidity back into the market.’