“The outlook for interest rates and mortgage rates for the rest of 2024 are looking very good,” said Paul Finch, director at London-based property agency Beauchamp Estates.
“I believe that in September we will see the first interest rate reduction, and as a result lending and mortgage offers will improve, typically when we have an interest rate reduction the number of applicants for homes rises by up to 40 per cent and sales deals rise by 20 per cent,” he added.
Interest rates in the UK were raised to the current level of 5.25 per cent from 0.10 per cent in March 2020 as consumer prices surged. The Bank of England acted after double-digit inflation prevailed between September 2022 and March 2023.
The higher financing costs dented demand for homes, translating into lower home prices. But after the rate outlook improved, there are signs demand is recovering. London home prices rose 0.2 per cent year-on-year in May, the first increase in a year, according to official data.
“Hong Kong and mainland Chinese buyers are always sensitive to prices,” said Wendy Chiu, joint managing director of Far East Consortium (FEC) UK. “It is a good moment for buyers to start looking for property as interest rates are expected to drop in the second half of the year.”
The positive outlook on interest rates is spurring agents and developers to step up marketing of their new projects.
Savills, for instance, is holding its first major UK project launch in the city in a year, said Mark Elliott, senior director and head of international residential at the property consultancy in Hong Kong.
The Ariel, a 23-storey residential tower with 167 units comprising studios and flats with one-to-three bedrooms with an area of between 400 and 2,071 sq ft, in Television Centre in White City, London, is being marketed with prices starting at £590,000 (US$762,000).
The project is the only tower in the neighbourhood of Television Centre, named because it was the former headquarter of the British Broadcasting Corporation, and is situated across from the Westfield shopping centre and the Imperial College.
Savills believes that an interest-rate cut is just a matter of time, and that current mortgage rates of 4.5 per cent could be reduced to below 4 per cent.
“Most expectations are that the Bank of England will start to cut bank rates from August,” said Mandy Wong, head of international residential at JLL Asia-Pacific. “And you could find more favourable mortgages that have started to creep into the market, products like under 5 per cent on two- to five-year fixed rates.”
That change was likely to be implemented only in September 2025 and the general consensus was schools were not likely to pass on the additional levy to students in the form of higher fees, said Peter Allen, sales and marketing director for residential at Stanhope.
The number of students from Hong Kong studying in private schools in Britain decreased by about 4.2 per cent to 7,677 in January from a record of 8,011 a year ago, according to the survey released by the UK’s Independent Schools Council in May.
What is certain, however, is that a non-domiciled tax scheme is set to take effect in April 2025. Non-domiciled people live in the UK, but have their home overseas for tax purposes and do not pay UK tax on money they make elsewhere and the special tax status will be abolished, the UK chancellor said in his Budget.
Initially, however, non-domiciled residents will have a four-year grace period before being taxed on their offshore incomes.
“The tax applicable to UK residential property for non-residents remains largely unchanged, which is the case for many of our HK and mainland Chinese buyers,” JLL’s Wong said.
“Potentially 200,000 more will be coming in the next three to five years but not for the London market only,” she said. “A lot of BN (O) passport holders are also interested in countryside properties outside London.”