The 18-Year Property Cycle: What it means for UK property prices

The 18-year property cycle is a theory that suggests property prices undergo predictable phases of boom and bust approximately every 18 years. This cycle is influenced by various economic factors, including interest rates, economic growth, and government policies. As we navigate through 2024, understanding where we are in this cycle can provide valuable insights for investors, particularly those servicing mid-high net worth expats and foreign nationals looking to invest in the UK property market. 

Current Phase of the 18-Year Property Cycle 

 Recent analyses and historical patterns suggest that we are currently in the recovery phase of the 18-year property cycle. This phase typically follows a downturn and precedes a significant boom. The recovery phase is characterised by gradual increases in property prices, restored investor confidence, and increasing demand which outstrips supply. 

Evidence of Continued House Price Increases 

  1. Recent Price Trends: Despite predictions of a decline, the actual data shows resilience in the UK housing market. For instance, the average house price in the UK as of March 2024 stood at £264,500, showing a slight increase compared to the previous month[9]. This resilience is part of a broader trend of stabilization and modest growth following the significant disruptions caused by the COVID-19 pandemic and subsequent economic challenges. 

2. Regional Growth Variations: While the overall UK market shows modest growth, specific regions, particularly in the North of England, Scotland, and Northern Ireland, have experienced more significant price increases. For example, Scotland saw a 5.6% increase in house prices year-on-year as of February 2024. These regional disparities indicate localized recoveries that could be attractive to investors looking for growth opportunities. 

3. Long-Term Forecasts: Looking beyond 2024, forecasts by major real estate analysts predict a return to more substantial growth. For instance, projections suggest a cumulative increase in house prices by nearly 18% from 2024 to 2029. This long-term optimism is based on factors like easing mortgage rates and a general improvement in economic conditions. 

4. Impact of Economic Policies: Recent government policies and economic indicators also support a positive outlook for the housing market. For example, the Bank of England's stabilization of interest rates has helped maintain affordability for borrowers, which supports continued demand in the housing market. 

Strategic Implications for Investors 

For investors, particularly those dealing with mid-high net worth individuals, the current phase of the property cycle offers strategic opportunities. The key is to identify regions with higher growth potential and to benefit from the general market recovery. Investors should consider the following strategies: 

- Regional Focus: Target investments in regions showing above-average growth, such as the North of England and Scotland, where the potential for appreciation is higher. 

- Long-Term Perspective: Encourage clients to adopt a long-term view of their property investments, capitalising on the expected growth through to the next peak of the cycle around 2026. 

- Diversification: Advise clients to diversify their property portfolios across different regions and property types to mitigate risks associated with any localised economic downturns. 

 Implications for Mortgage Seekers 

For those looking to secure a mortgage, the current market conditions suggest a favorable environment for building equity. As house prices are expected to continue rising, buyers entering the market now could see significant appreciation in their property values, enhancing their equity position. This is particularly advantageous for first-time buyers and those looking to invest in regions with higher growth potential.

However, it's important to note that while mortgage rates have shown some volatility, the overall trend towards stabilisation provides a conducive environment for securing financing. Buyers should be aware of potential rate changes and consider locking in rates where possible to ensure predictable costs. 

Conclusion   

The 18-year property cycle provides a useful framework for understanding the fluctuations in the UK property market. As we move through the recovery phase towards the next boom, there are significant opportunities for informed investors. By focusing on regions with robust growth prospects and adopting a long-term investment strategy, investors can capitalise on the cyclical nature of the property market to build substantial equity and achieve favorable returns. 

 At IMS, we understand the complexities of the property market and the unique needs of our clients, especially mid-high net worth expats and foreign nationals. Our approach is holistic, considering not just your current property portfolio but also your future aspirations. We are committed to helping you make and implement the best mortgage financing decisions, with a deep understanding of market cycles and regional variations.

Whether you're looking to buy your first home, invest in a promising region, or reevaluate your current portfolio, IMS is here to provide expert guidance and support. Contact us today to discuss how we can help you navigate this dynamic market and optimise your property investments. 

Sources: 

https://thesecretwealthadvantage.com/

https://baroncabot.com/blog/house-price-predictions 

https://www.gov.uk/government/news/uk-house-price-index-for-january-2024 

https://moneyweek.com/investments/property/house-prices/605607/house-prices-in-2023 

https://www.zoopla.co.uk/discover/property-news/house-price-index/ 

https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/december2023 

https://commonslibrary.parliament.uk/research-briefings/sn02820/