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Positive changes ahead for UK land and property
We expect to see both a change of government and a change in the trajectory of interest rates in 2024. One of these will have more of an impact on our markets than the other…
The UK is one of more than 40 countries that is facing a general election in 2024, and the bookies are convinced that there will be a Labour victory. Typically, we do see a reduction in transactional activity in the run-up to a general election, but this is usually compensated for by a rush of activity after the results. We don’t expect that 2024 will be any different, despite the high likelihood of a swing from blue to red. Whoever wins the election has a plethora of policy challenges ahead, most notably around energy transition and housing provision.
For land and property, the more significant change will be the first interest rate cut of this cycle. All of our forecasts are based around the assumption that the base rate will start falling in 2024 and be below 2% by 2027. This will support a return of confidence amongst investors, developers and house builders which will lead to an improvement in transactional activity and deliver some capital value growth for most sectors over our five-year forecast period.
The rationale for investing in land and property remains strong, particularly for investors who are looking for infrastructure-type investments that deliver comparatively predictable income streams over the long term. A rising interest in food security and carbon reduction is likely to boost investor interest in these segments. Elsewhere, we expect to see opportunistic investors moving to capture the bottom of the value cycle in 2024, focusing on opportunities where capital values have either over-corrected, or where rental growth prospects might be accelerating.
We are rarely able to see the bottom of any cycle this clearly, but we are confident that 2024 and 2025 will be the years that normal service will be resumed.