In his latest blog post, Hugo Davies, Chief Capital Officer and Managing Director reacts to the recent UK GDP figures and the impact it will have on the UK housing and property markets.

The latest UK GDP figures for December 2024 show modest growth of 0.4%, largely driven by the services sector, following 0.1% growth in November. 

Over the last three months, GDP grew by just 0.1%, reflecting weak but persistent momentum. Annual GDP growth for 2024 stood at 0.8%, lagging behind the US’s 2.8%, reinforcing concerns about the UK’s sluggish recovery. 

However, the latest indicators suggest that some sectors are beginning to turn a corner.

While technically avoiding recession, these figures show a mixed picture. The Bank of England’s Monetary Policy Committee (MPC) last week slashed its 2025 GDP growth forecast in half, reinforcing concerns that private sector activity remains fragile. Growth has largely been driven by government consumption and investment, benefiting from the Chancellor’s Autumn Statement, while the private sector continues to struggle, with resilience seen only in services. Production grew by 0.5% in December, recovering from the previous month’s decline, while construction output fell by 0.2%, indicating ongoing pressures on development activity.

However, there are signs of tentative recovery in the housing market. Estate agents are reporting the most widespread increase in properties coming to market since the pandemic, suggesting that lower borrowing costs are beginning to stimulate activity. The Royal Institution of Chartered Surveyors (RICS) noted a positive net balance of new sales instructions, marking the highest level since September 2020. Mortgage approvals are also recovering, rising by 28% year-on-year in December, while Halifax data suggests that house prices exceeded expectations in January, reaching new record highs.

Investment Trends and Opportunities

For investors, GDP performance is more than just an economic indicator – it’s a gauge of market confidence and capital deployment opportunities. While business investment remains weak, housing market activity is providing some encouragement, particularly as interest rate expectations shift in favour of further reductions later this year.

The latest data suggests that property remains an attractive asset class, with investment opportunities emerging across both new developments and the retrofitting of existing housing stock. Institutional investors, HNWIs, and family offices will be particularly focused on how lending conditions evolve in response to these economic signals. Increased property listings, combined with improving affordability, create stronger investment conditions, particularly in sectors benefiting from long-term structural demand, such as the rental and refurbishment markets.

The Role of Property Finance in a Slow-Growth Economy

With GDP figures confirming that growth remains subdued, the question remains: will the Bank of England act decisively to support a sustained recovery? The recent 25bps rate cut to 4.5% was a step in the right direction, but with the MPC now forecasting significantly lower growth for 2025, further adjustments may be necessary.

The construction sector contracted by 0.2% in December, despite a stronger November, suggesting that development finance remains constrained. Ensuring that capital continues to flow into viable projects will be essential to sustaining the housing supply. Equally, retrofitting and upgrading existing housing stock will remain a key investment theme, particularly as investors seek opportunities in the transition to a more energy-efficient property sector.

Despite the broader economic uncertainty, the UK property market continues to demonstrate resilience, supported by recovering mortgage approvals, stable transaction volumes, and an improving supply pipeline. The property finance sector will continue to adapt and identify new investment opportunities, and as interest rates ease, the sector remains well-positioned to capitalise on renewed momentum. The UK’s housing market is not just weathering the current conditions—it remains an investable, long-term asset class.