JLL has released its latest forecasts for the UK housing market, revealing insights into house prices, rental growth, transactions, and future trends. Despite some adjustments, the market has proven more resilient than expected, with prices experiencing a less significant decline compared to the 2008 financial crisis.

The continued imbalance between supply and demand has supported the growth in rents. JLL has upgraded rental forecasts for 2023, with UK rents expected to increase by 6%, London rents by 7%, and central London rents by 6.5%.

Transactions across the UK are expected to total around a million this year, in line with JLL’s forecast. However, a fall in the volume of transactions has been observed during the first eight months of the year. This can be attributed to rising costs and the impact of the pandemic on the construction industry. JLL has adjusted its 2023 year-end forecast for new starts to 150,000, down from the initial forecast of 160,000.

Looking ahead to the period from 2024 to 2028, JLL anticipates that the lack of new rental stock and a challenging interest rate environment will lead to rental growth exceeding wage growth. Rental prices across the UK are expected to increase by 5% in 2024.

On the sales side, 13 months on from summer 2022 peak, house prices are down by 5.3% according to figures from Nationwide. This compares to a fall of more than 13% at the same point following the 2007 peak.

In JLL’s outlook for prices in 2023 remains broadly unchanged, the firm forecasts that house prices will fall by 6% nationally in the year to December 2023. In London, prices are expected to decrease by 4% in the same period. However, in central London, a downgrade is predicted, with prices expected to fall by 3%, down from the initially forecasted increase of 2.5%.

The report also highlights the significant undersupply of homes in the UK. Since the introduction of housing targets in the mid-2000s, there has been a cumulative undersupply of approximately 1.5 million homes. JLL predicts that this undersupply will worsen further, with a cumulative shortfall of 720,000 homes between 2023 and 2028.

Despite the challenges faced by the UK property market, JLL remains optimistic about the future, with forecasts showing a gradual improvement in the economy and a positive outlook for the residential sector.

Marcus Dixon, director – UK residential research at JLL, said, “Despite the uncertainties faced by the UK property market, we have seen resilience and stability over the past year. Looking ahead, we forecast a bottoming out of prices in 2024, with single-digit annual falls likely. The UK housing market still faces challenges in terms of supply, with a cumulative shortfall of 720,000 homes expected between 2023 and 2028. Addressing these structural barriers is crucial for achieving meaningful increases in supply and mitigating affordability issues.”