As we draw to the end of another year, we always take time at Eightfold Property to reflect on the year that we've had, our successes and areas for improvement, but importantly, this also includes casting an eye forward to the upcoming year. The next year looks set to be key for the future of the property industry in this country, with pending legal changes, as well as financial pressures, and climate considerations shaping the landscape for not only 2024, but likely beyond that as well.
For the team here at Eightfold Property, we're hoping that 2024 brings further growth and success for us as a business, and we know that understanding the factors affecting the industry will be key to this. The incoming Leasehold Reforms are sure to have an impact on the ownership of leasehold properties in a way that will be felt in their values, whatever form they end up taking, whether this includes ending the leasehold system completely (as has been suggested), or not. Tenancy reforms look set to create the biggest shakeup in Residential Lettings for a generation, and despite the contents of this bill seemingly changing on a weekly basis, it's clear the impact will be huge.
We all know that the climate will shape all policy going forward, and this is also certain to be felt in the property industry, both in 2024 and further into the future, with an emphasis on improving the efficiency of homes, a preference from buyers and tenants towards more efficient buildings. It's no surprise given this, that the RICS were in attendance as observers at COP28 this year, and we're likely to see further developments from this as well.
Moving into 2024, our Department Directors have made their predictions for the coming year:
Dan Lyons, Residential Lettings
With the interest rate hikes and general cost of living being huge challenges for 2023, we are looking at interest rates dropping, and a definite lowering of energy coming together to make the coming year a bit easier on both landlords and tenants. Landlords who were highly leveraged really suffered in 2023, with many being forced to sell up and invest in different markets, or put up their rents significantly – which is something that we saw happening a lot, both in properties we managed, in the local area, and across the country. Many of those who were not leveraged highly were able to take advantage of the situation and make sure their rents stayed static, meaning their properties were let quicker, and their current tenants were not forced into finding cheaper accommodation elsewhere.
I feel as though we are on the precipice of the next cycle, with 2024 plateauing and calming down a little and I think the next financial cycle will start in 2025, where the market will loosen and with money costing a bit less and the energy not being so much of an issue, investing will increase and those in the right position will be able to take advantage of a new market.
Robert Hawley, Residential Sales
With the average interest rate for a 2-year fixed mortgage dropping below 6% at the end of 2023, coupled with energy prices lowering; things are looking more positive for the property market going into 2024. This drop in costs will make it more affordable for many, especially first-time buyers to purchase and service a property. I expect that we will still see a number of homeowners coming to the end of long fixed-rate deals and having to re-evaluate their position, given the higher cost of borrowing, but there is likely to be a larger pool of buyers in the market compared to this year.
The dropping in interest rates will also mean many landlords will be less stretched on their investment properties, making HMOs a more attractive prospect again as the rents continue to climb.
I think that 2024 will be a year of settling as we get used to the new normal as I don’t see interest rates dropping back to the low levels many have enjoyed over the previous 10 years. Brighton in particular, and across most of East Sussex, we have always seen a resilience in the market that perhaps shelters us a little from the market volatility some areas of the country can see; partially due to its proximity and easy commute to London, and this has been true over the last couple of years where prices seem to have plateaued rather than dropping.
Max Pollock, Commercial Agency
Despite the doom and gloom spouted out by the media activity in the Sussex commercial property market has remained resilient throughout 2023 and this should continue in 2024.
Many businesses are still navigating their way in regards to office space as to what the perfect solution is alongside Hybrid Working. I anticipate that we could see more office share scenarios that allow co-habiting firms to have flexible and fixed days; where on certain days the space is solely occupied by one business and is a shared space on others allowing up to two or three companies to share a space in this manner and also that serviced office providers will embrace this and set the trend.
In regards to Retail and Leisure, we are blessed in Sussex and in particular in Brighton, where we are in a bubble and continue to have low vacancy rates. The news of a further 12 months of 75% business rates discount in the Autumn budget is a positive for the economy, which will give retailers confidence to carry on and make business sustainable for the short term. If the Government could set this out for 3,4 or 5 years, it would be fantastic and allow retailers to plan ahead further. It would be great to be on level ground with so many other countries that have no such thing as business rates.
With interest rates anticipated to drop prior to the election, this should hopefully stimulate the investment market and give confidence to buyers whilst also making property a more appealing option than leaving money in the bank. This should hopefully also lower yields in the market thus closing the gap between expectations of buyers and sellers. If build costs were to reduce or at least plateau this would also increase demand for development sites and most likely push prices up for sites.
Overall, I'd say we are not out of the woods yet, but the future is looking at its brightest for a while following a good few years of uncertainty... or at least I hope it is, but who knows!
Charlie Runcorn MRICS, Block and Commercial Management
One of the most significant developments expected to shape the residential property landscape in 2024 is the implementation and impact of the Leasehold Reform Bill. This legislative initiative, aimed at addressing longstanding concerns inherent within the current leasehold system, is poised to bring about a shift in property ownership and management. The Bill is expected to empower leaseholders with increased control over their properties. Provisions for lease extensions, enfranchisement, and ground rent reforms are likely to redefine the landlord and tenant dynamic, with the Bill’s aim of fostering a more equitable relationship between the two. As the introduction of this Bill, and wider legislation, introduces new complexities, property managers will need to ensure they keep themselves fully informed and updated with the requirements. As ever, ensuring continued compliance will be paramount to delivering a high level of Client service and diligent operation of managed assets.
Another important event due to affect the industry in the next year will be the attendance of the Royal Institution of Chartered Surveyors (RICS) at COP 28, the 28th UN Climate Change Conference. This attendance signals a growing recognition of the surveying industry’s role in fostering environmental stewardship. Investors and property management professionals will increasingly seek to incorporate Environmental, Social, and Governance (ESG) principles into their operations. From energy-efficient building management to sustainable landscaping practices, ESG considerations will become integral to property portfolios. The push for sustainable practices will likely lead to an increase in appetite for green building certifications. Property managers will seek accreditation for eco-friendly initiatives in order to meet the rising demand for environmentally conscious living and working spaces, and ultimately said certification’s potential for enhancement of property values. The attendance of RICS at COP28 should be seen as a positive step towards aligning the construction, property and surveying industries with climate goals, emphasising the importance of a collaborative effort and the role that professional institutions can play in promoting sustainable and resilient practices within the built environment.
For more on the RICS involvement at COP28, see here
For information on Mortgage Rates at the time of writing, see here