Economic update Spring/Summer 2024

Panorama of Docklands and Canada Water

The UK economy has likely emerged from recession, although growth remains muted. Inflation is falling and rates cuts are on the cards this year, which will translate into lower mortgage rates.

Key facts

  • Early indications that UK out of recession, but growth will be muted
  • Rates will fall this year, but number of rate cuts will depending on UK and world outlook
  • Mortgage have receded from peaks last year

The UK grew by 0.1% in February according to the latest data from the Office for National Statistics, and follows 0.3% growth in January. This is hardly stellar growth, but marks a turnaround from falling output at the end of last year and means the country is no longer in recession. Economic growth will still be muted in the coming years according to the Office for Budget Responsibility (OBR), in it’s latest report which was published alongside March’s Budget.

While better economic growth is clearly good news, as it signals more spending, rising job levels and more pay, it also takes away some of the urgency for base rate cuts.

The other key trigger for base rate movements is inflation, and that has fallen sharply since last Autumn. The CPI rate of inflation was 3.2% in March, is tipped to sink to 2.2% this year by the OBR. The Bank of England’s inflation target is 2%. Capital Economics thinks inflation could fall as low as 0.5% later this year and into 2025. Falling inflation means the Bank of England can start to reverse the monetary tightening introduced to try and tackle rapidly rising inflation in during 2021 and 2022 by cutting base rates.

Graph showing annual change to UK inflation. Cluttons residential market update Summer 2024

There were expectations at the start of the year that there could be five quarter point rate cuts this year, which would take the base rate from 5.25% to 4% by December. Expectations for this trajectory of rate cuts were highest at the turn of the year, and as a result swap rates fell sharply, and mortgage rates followed suit.   Some higher-than-expected wage growth early in the year knocked back those expectations. Wage growth data is closely monitored, as the Bank often highlights concerns that higher wages feeds into higher prices as businesses must recoup the cost of higher wage bills in the cost of their services. As the expectations for the first rate cut moved back to the summer, swap rates bounced back up a little, and as a result mortgage rates have also risen in recent months from the lows in January, but they remain below the peaks hit last year.

There are concerns that the escalating conflict in the Middle East could push up oil prices, and that the UK could follow the US example and see inflation declines stall. Either or both scenarios would mean the Bank of England would have to wait before making any base rate cuts.

Inflation continued to fall in March according to the latest data, dipping to 3.2%. But this was higher than the 3.1% forecast, and money markets saw this as evidence that rate cuts may be pushed back to later in the year. Capital Economics still forecasts several rate cuts this year, but the tone of the Bank of England’s Monetary Policy Committee (MPC) rate meeting in early May will be closely watched, as will April’s inflation data released later in the month. Any rate cuts will be good news for borrowers on variable rate mortgages, and for those looking to take out a new mortgage during the rest of the year.

The information provided in this report is the sole property of Cluttons LLP and provides basic information and not legal advice. It must not be copied, reproduced or transmitted in any form or by any means, either in whole or in part, without the prior written consent of Cluttons LLP. The information contained in this report has been obtained from sources generally regarded to be reliable. However, no representation is made, or warranty given, in respect of the accuracy of this information. Cluttons LLP does not accept any liability in negligence or otherwise for any loss or damage suffered by any party resulting from reliance on this publication.

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Gráinne Gilmore

Director of research and insights

Head office

T +44 (0) 20 7647 7142
Gráinne Gilmore, director of research & insights, Cluttons
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Einar Roberts

Partner, residential consultancy

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T +44 (0) 20 7647 7128
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James Hyman

Partner, head of residential agency

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T +44 (0) 20 7407 3669
James Hyman, head of residential agency, Cluttons
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Neil Duffy

Partner, residential valuations

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T +44 (0) 20 7647 7265
Neil Duffy
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Research

London development Q3 2020

Activity levels in the London development market bounced back strongly in Q3 across all three main metrics (starts, completions and sales), according to Molior data as shown in Table 1. This suggests the impact of lockdown was short-lived and contained to the previous quarter.
Greater London sales & rental review Q3 2020
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Greater London sales & rental review Q3 2020

Much of the commentary around London property in the pandemic has suggested that increased working from home and a desire for more space – particularly gardens – could really reshape the market as people and businesses abandon the city.
UK development overview Q3 2020
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UK development overview Q3 2020

We saw last quarter that residential development activity quickly recovered to pre-pandemic levels once sites were able to open up again.
UK rental review Q3 2020
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UK rental review Q3 2020

The national lettings market continued its post-pandemic recovery in Q3, apart from in London where high supply and low demand continued to put downward pressure on rents.
Forecasts & outlook Q3 2020
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Forecasts & outlook Q3 2020

Experian’s latest house price forecasts for Cluttons are shown in the table below, based on their central economic scenario of a ‘delayed V-shape’, which sees UK GDP recover to pre-pandemic levels at the start of 2022.
Prime Central London Q3 2020
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Prime Central London Q3 2020

The Cluttons Prime Central London Index, shown in Figure 1, reported that sales values in PCL were 8.4% lower in Q3 2020 than a year earlier, the seventeenth consecutive quarter of annual price falls.
UK economic outlook Q3 2020
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UK economic outlook Q3 2020

The economic data reported since our last update appears to have finished off any hopes of a ‘V-shaped’ recovery.
Wider South East Q3 2020
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Wider South East Q3 2020

tracking the national average for several years, whereas London has seen more volatility, according to the Nationwide indices.
UK industrial market review Q3 2020
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UK industrial market review Q3 2020

The drivers of demand for industrial real estate will continue to evolve.
UK office market review Q3 2020
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UK office market review Q3 2020

Structural changes effecting the UK office market will play out over several years.
UK office leasing review Q2 2020
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UK office leasing review Q2 2020

Coronavirus leads to dramatic declines in leasing activity.
UK office investment review Q2 2020
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UK office investment review Q2 2020

Transaction volumes decline during lockdown.
UK retail leasing review Q2 2020
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UK retail leasing review Q2 2020

Landlords and tenants shared the strain of pandemic lockdown. COVID-19 is accelerating the trend in the shake-out of retail.
UK industrial & distribution review Q2 2020
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UK industrial & distribution review Q2 2020

Transaction volumes declined during lockdown, with investment into distribution most favoured.
UK retail investment review Q2 2020
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UK retail investment review Q2 2020

Retail investment market shuts down during the COVID-19 lockdown.
Forecasts & outlook Q2 2020
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Forecasts & outlook Q2 2020

PCL values set to bounce back next year but UK recovery delayed until 2022. Will Brexit and potential tax reform throw things off course?
Wider South East Q2 2020
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Wider South East Q2 2020

Stamp Duty holiday and desire for space see interest rise across wider South East.
UK rental review Q2 2020
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UK rental review Q2 2020

Rental market bounces back but outlook is mixed as increases in remote working and studying could limit demand in some sectors.
Greater London sales & rental review Q2 2020
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Greater London sales & rental review Q2 2020

London’s rental market set to struggle while buyer demand remains robust despite stretched affordability – and is given further boost by Stamp Duty holiday.
Prime Central London Q2 2020
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Prime Central London Q2 2020

Rental and sales values dip across all Prime Central London areas but activity continues where buyer and seller expectations are aligned.
London development Q2 2020
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London development Q2 2020

Sales and construction hit by pandemic in Q2 but latest completions data is more positive.
UK economic outlook Q2 2020
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UK economic outlook Q2 2020

Slow initial recovery and scale of government support suggest difficult time ahead for economy.
UK development overview Q2 2020
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UK development overview Q2 2020

Housebuilding sites reopen and developers get boost from increased planning flexibility.
UK sales review Q2 2020
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UK sales review Q2 2020

Early indicators suggest post-lockdown surge for sales market, but how long can it be sustained?
London residential development Q1 2020
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London residential development Q1 2020

The pandemic introduces additional risks to the Central London new build market, on top of its general impact.
Residential London review Q1 2020
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Residential London review Q1 2020

As COVID-19 stalls sustained price growth in Greater London, we review recent data indicating already decelerating growth in high-value locations.
Prime Central London review Q1 2020
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Prime Central London review Q1 2020

Initial research suggests activity in Prime Central London (PCL) will be particularly affected by COVID-19, but discretionary buyers and sellers may help the market recover quicker than other parts of the UK.
UK residential forecast Q1 2020
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UK residential forecast Q1 2020

The extent and duration of the health and economic crises caused by COVID-19 are still unknown, casting a shadow over the economy.
UK Home Counties review Q1 2020
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UK Home Counties review Q1 2020

Sales market sees values across all counties close to flat over the past year, with activity slightly down overall.
UK residential development review Q1 2020
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UK residential development review Q1 2020

As many sites’ shutdown at the start of lockdown, new build development is subject to the twin effects of an uncertain economy and the physical disruption.
UK rental review Q1 2020
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UK rental review Q1 2020

As new landlord instructions and rent expectation figures drop to their lowest ever levels, how will rents be impacted later in the year?
UK economic outlook Q1 2020
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UK economic outlook Q1 2020

Initial data measuring the economy post-shutdown suggested a large impact. But as the Coronavirus pandemic continues, the Government’s unprecedented response gives hope that that the outcome will be better than initially expected.
UK residential sales review Q1 2020
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UK residential sales review Q1 2020

At the end of 2019, the UK’s housing markets were starting to emerge from a long period of ‘wait and see’. By January, UK sales expectations were the highest they’d been since the end of 2015. But before the quarter ended, COVID-19 brought transactions levels to an immediate halt. Here, we assess the potential impact on housing throughout the rest of the year.
Residential market outlook, September 2019
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Residential market outlook, September 2019

Price corrections leading to an increase in buyer enquiries.
Residential market outlook June 2019
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Residential market outlook June 2019

Brexit continues to dominate the headlines. Resilient buyers sought to close deals across the capital before the 29 March deadline, others are watching and waiting for a clarity and certainty that, despite the extension, remains elusive.
London residential market outlook winter 2018/19
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London residential market outlook winter 2018/19

Cluttons has released its Winter 2018/19 Residential Market Outlook report.
London office market outlook summer 2018
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London office market outlook summer 2018

Cluttons has released its London Office Market Outlook report for Summer 2018.