Kwasi Kwarteng’s ‘mini budget’ didn’t just affect the value of the pound – it also hit the property market hard, as the most recent housing statistics of that time are unveiled.

Zoopla’s House Price Index showed annual house price growth fell in October to 7.8 per cent. Quarterly growth was 0.7 per cent – its lowest since February 2020. That was just before the start of the first major pandemic lockdown. Sellers have also been accepting bids of around three per cent below their asking price.

Housing demand dropped 44 per cent in October

A drop in demand by 44 per cent compared to October 2021 also coincided with Liz Truss’s short-lived role as UK Prime Minister. Actual sales were down 28 per cent. At the time she was also confronted with escalating utility prices and a cost of living crisis. Banks and other high streets lenders responded by withdrawing hundreds of lower-rate fixed priced mortgage products. Mortgage rates also soared to more than six per cent in November. 

Zoopla’s executive director, Richard Donnell, said he believed believes rates would drop to between four to five per cent at the start of next year. In their report, the property portal referred to the fall in prices as a market ‘shake out’ rather than ‘the start of a crash.’

His predictions are backed up by HMRCs house sales figures for October. These show that, despite the cost of living crisis, homeowners are still keen to move. There were, in fact, 110,850 property transactions last month – 29 per cent more than in October the previous year. The October figure is just two per cent down on September’s numbers.

First-time buyer desperation as rents increase

Although Donnell did expect growth to stop next year and perhaps even enter a negative phase. He also expected rents to increase, leading to a boost to the number of first-time buyers looking to secure themselves a step on the property ladder.

There is 40 per cent more housing stock on the market today than this time last year. However, that number is 20 per cent less than before the start of 2020.

The good news for first-time buyers is, of course, the cuts to Stamp Duty, under the ‘mini-budget’ and which current chancellor Jeremy Hunt confirmed would remain under Sunak’s government. These are no tax on the first £250,000 of a property’s value and pay 5 per cent from £250,001. First-time buyers pay stamp duty on property valued at over £425,000. They can claim first-time buyers’ relief on properties valued at up to £625,000.

Strong rental market tempting investors

The UK rental market is particularly strong at the moment, tempting more property investors back into the buy to let sector, according to a survey by bridging finance broker Finbri. Void periods for landlords are down while yields are increasing.

At the moment the typical yield in the UK a landlord can expect is around 4.7 per cent. Some locations though are expected to fare better than others. These include busy cities, such as Aberdeen, Liverpool, Reading and Bolton.

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