This week’s decision to hold the Bank of England base rate will put a dent in house sales early next year say estate agents.
That’s because mortgage interest rates will remain the same, meaning property prices will still be out of reach to thousands of would-be buyers.
Two-thirds of bank committee voted for reduction
The Bank’s Monetary Policy Committee voted 6-3 to retain the rate at 4.75% rather than reduce it by 0.25 percentage points as some economists surmised. Those in favour of retaining the current bank rate said it was necessary in order to manage inflation. The Bank is currently aiming for an inflation target of 2%. Inflation sat at 2.6% last month – 0.3% higher than in October’s figure.
Despite this, many property experts are confident that there will be a fall in the base rate next year, and subsequently a drop in mortgage interest rates. Certainly, buyers and lenders alike will be hoping for a fall in rates as a result of Stamp Duty charges reverting to previous ratios on April 1.
Mortgage expert at property portal Rightmove, Matt Smith said he expected a typical mortgage interest rate to sit at around 4% by the end of next year. But he added: “This is dependent on the impact of a wide variety of unpredictable factors, including geo-political tensions and inflation.”
Former Royal Institute of Chartered Surveyors (Rics) chairman, Jeremy Leaf said a cut in the base rate would be particularly welcomed by first-time buyers, especially in light of increasing rental rates.
Scotland tops the league for house transactions
Meanwhile, in terms of property sales, Scotland topped the league for 2024. That’s according to recently released government figures. The Office of National Statistics data shows there were 54,428 property transactions north of the border, equating to 15% of the UK total.
The next highest region for property sales was the South East, with 14% of the total. Third was the North West, at 11%. Northern Ireland saw least properties sold, with a percentage rate of just 3.4%. Despite this, Belfast was the UK city in which most homes were sold, at 7333 properties. Second was Edinburgh and third, Glasgow. A total of 3994 properties were sold in Leeds, England’s highest city total, outside London.
More than one quarter of surveyors reported a rise in property prices in their region during November. That compared to just 16% of members of theRoyal Institution of Chartered Surveyors (Rics) in October.
The statistics bode well for the first few months of next year. That’s when the market is expected to speed up as would-be buyers try to beat the Stamp Duty changes at the start of April.
Property Portal Rightmove’s Tim Bannister reported recently that he expected the whole of 2025 to be a busy year for house transactions, predicting there would be around 1.15 million completed.
But senior economist at Rics,Tarrant Parsons, didn’t share his optimism. He believes currently high interest rates and the broader macroeconomy will still make buyers hesitate on such large purchases.
His concerns are borne out by figures released by the Office for National Statistics this week. The government data showed that the cost of the average property in England last year was 18.2 times above typical household income of £34,569. That was for the year to March last year while, at the same time, the typical property was valued at £298,000 – a ratio of 8.6. For poorer households the ratio was 18.2.
Mortgage rates to fall next year
Fixed mortgage rates are currently around 4.83% and 5.08% per cent for five-year and two-year products respectively. It’s expected these will reduce to around 4% by the end of 2025. They may even reduce in 2026, but analysts don’t expect them to fall to pre-cost of living rates. The expectation they will fall though is prompting more people to take out two-year mortgages.
More first-time buyers than last year
Rightmove reports there are 13% more first-time buyer enquiries than there were at the same time last year. Rents continue to rise, although Rics reported a 1% drop in enquiries list month. This may, of course, be due to the time of year.
In order to battle the house crisis Sir Keir Starmer has recently vowed to build 300,000 new homes annually. The previous Conservative government promised similar construction figures but 200,000 was the highest number of homes built in any one year.
Property prices have risen 4.8% over the past 12 months.
That’s according to the latest figures from the Halifax House Price Index, published today. The news brings the price of the average property in the UK to £298,083.
Biggest November jump for two years
The annual jump is the biggest since November 2022. Price growth is highest in Northern Ireland, at 6.8%. But the North West of England isn’t far behind, with growth of 5.9%. The rise in Wales was 4.1%. In Scotland, the picture for home owners wasn’t quite as rosy, with an increase in property prices of just 2.8% year-on-year. London increases were higher than north of the border. Property in the capital was, in fact, up 3.5%, bringing the cost of a typical home there to £545,439.
Head of Mortgages at the high street lender is Amanda Bryden. She said the rise in UK property prices was the fifth in a row. The monthly jump between October and November was 1.3%.
Ms Bryden added: “We are seeing improving levels of demand for mortgages. An easing in mortgage rates boosts buyer confidence.”
She did add though that the current economic situation exacerbated affordability difficulties for many would-be house buyers.
Propertymark CE Nathan Emerson insisted that with mortgage interest rates falling buyers are once again warming up to market conditions.
Analysts urge caution as cost of living continues to impact
Other analysts don’t necessarily share Emerson’s confidence though.
Karen Noye of Quilter admitted falling mortgage rates and general market stability had led to a ‘rebound in buyer activity.
But she was also conscious that rising cost of living was continuing to have an impact on buyers’ finances.
“For the housing market to maintain momentum, a balance will need to be struck between supporting demand and addressing affordability constraints,” she added. “That’s particularly the case because higher interest rates are likely to remain a feature of the market for some time.”
As expected, the Bank of England declared a second base rate cut this week, reducing the amount from 5% to 4.75%.
This is due to a lowered inflation figure, which is now sitting at less than 2%. It’s a rate which the Office of Budget Responsibility say could last until 2029, giving homebuyers renewed confidence of stable mortgage interest rates for the foreseeable future. The Bank’s first base rate cut this year was in August when it fell from 5.25% to 5%.
In anticipation of a 0.25% drop, mortgage rates had already begun falling in recent weeks. They are expected to go down even further in the next few days and weeks, giving a welcome injection to the property market. At the moment mortgage rates are the lowest for two years.
Base rate predictions for a longer trajectory
The base rate is expected to continue to fall over time, but this will be at a slower pace than previously predicted, following Labour’s ambitious borrowing and spending plans in the recent Budget.
Not only are there more properties coming on to the market – to the extent it is fast becoming a buyer’s market – but mortgage approvals too are on the up. October was in fact, the fourth month in a row where, with a total of 65,647 mortgages given the green light, figures have surpassed those of the previous month.
House prices at highest rate ever
Meanwhile, house prices reached their highest total ever in October, with the average property now sitting at £293,999. That’s according to the latest Halifax House Price Index. The price has increased 3.9% compared to the same period last year. Regionally, the biggest increase was in the north west of England, where the value of property jumped 5.9% year-on-year to £235,587.
The fall in mortgage interest rates isn’t the only fuel being added to the property market fire, however. The looming stamp duty deadline of April 1 is also accelerating growth. That’s because buyers are looking to secure a housing deal before stamp duty relief rates revert to their previous higher levels. Expect much activity from now and well on into 2025.
Landlords looking to sell one-bedroom properties shouldn’t have too much difficulty over the coming months.
That’s because, stamp duty thresholds and the ‘nil rate’ for first-time buyers, will revert to normal in April next year. And that means would-be first-time buyers will be rushing to buy and complete before the deadline looms. House price completions are currently taking around 152 days, according to the Rightmove property portal.
At the moment, buyers who purchase a property below £250,000 pay no stamp duty ie ‘nil rate.’ This cut-off point is likely to fall to £125,000 next year. By the same token, the threshold of £425,000 for first-time buyers could revert to £300,000. That means anyone purchasing a property at the UK average rate of £370,759 will have to pay an additional £3,538 in Stamp Duty Land Tax.
Rightmove’s Tim Bannister said that were the first-time buyer threshold of £425,000 to fall to £300,000 then only 37 per cent of properties would be stamp duty-free compared to 58 per cent today.
“This will particularly affect buyers in regions with higher property prices, such as London and the South East,” he added.
What buyers want in a property
Meanwhile, if you’re looking to sell your one-bedroom property then you’ll have a better chance of doing so if it has a breakfast bar or kitchen island and a good EPCA rating.
Estate agents Yopa found that properties with at least one of these three attributes, sold quicker than others of the same size.
The breakfast bar was deemed the most desirable feature (13.6 per cent of Yopa listings had one). Kitchen islands may not be possible in a smaller one-bed property, but it’s something that 12.6 per cent of all homes on the list offered. The same percentage of properties listed had a good EPC rating (of ‘C’ or above).
Other desirables that home buyers in general are looking for include a freestanding bath, wooden beams, high ceilings throughout and a walk-in clothes closet.
Figures released by the Office for National Statistics this week show property prices rose 2.8% from August 2023 to the same month in 2024.
The official statistics – which are reported every quarter – don’t deviate greatly from recent house price indexes and show that the market is indeed ‘on the up.’ House prices were, in fact, around £8000 higher than the previous year, bringing the cost of the average property to £292,924. August was the sixth month in a row in which property prices were higher on a year by year basis.
North West of England shows biggest jump in prices
In terms of regional variation, the biggest prices jumps were in the North West of England. There the average property jumped by 4.5% to £225,248.
The poorest property price rises over that 12-month period to August 2024 were in the South West, where property jumped just 0.8% to £320,774.
Analysts attribute the growth in property prices to increased interest in the market, thanks to lower mortgage interest costs and a settled economy with Labour proving triumphant in the general election. Added to this, interest rates are predicted to fall even further before the end of the year – thanks to an expected Bank of England base rate cut.
Property prices expected to remain stable for remainder of year
The increased interest in the market isn’t expected to wane up any time soon, meaning house prices are expected to remain stable for the foreseeable future.
Marc von Grundherr, Director of capital estate agents’ Benham and Reeves, isn’t expecting the upcoming Autumn Statement to bring any property purchasing incentives.
He added: “The housing market is likely to march on undeterred and we’re set for a very strong end to the year, despite the usual seasonal lull that comes with the Christmas period.”
And, of course, it wasn’t just in England that house prices exceeded their previous peak. Property in Northern Ireland rose by 6.4% year-on-year to £185,025. In Scotland the jump was 5.4% to an average £199,971 and in Wales, bricks and mortar investments rose 3.5% to £222,925.
An increase in the sale of second homes is putting up rental demand.
Changes to tax regulations and a possible increase in capital gains tax has seen landlords list their properties – to the extent almost one third of all properties listed last month were second homes. That in itself could signal an increase in existing rents as demand begins once again to far outstrip supply.
Majority of surveyors expect property prices to rise
The findings, from the latest report of The Royal Institution of Chartered Surveyors (RICS) backed up other house index figures released last week from the Nationwide and property portal Zoopla. They pointed to an accelerated UK property market – one in which property prices were expected to rise over the next year, according to more than half of surveyors interviewed.
Analysts refer to reduced mortgage interest rates as the kickstart the market needed. And these rates are expected to fall even further with expectations that the Bank of England will reduce its base rate by a quarter percent in early November. The Bank cut it from 5.25% in August – the first reduction in four and a half years.
Meanwhile Finance Minister Rachel Reeves warns she may increase capital gains tax from 33 per cent to 39 per cent in the budget at the end of this month.
Difficulties for today’s first-time buyers put into perspective
From second home owners to first time buyers, upmarket estate agency Hamptons this week showed just how difficult it is to access the property market today.
Their report showed that the typical mortgage payment for Generation Z (who were born in the late 1990s) is double that paid by previous generations. The typical sum for Generation Z is £1,739 a month. Millennials have had it much easier. Those born in the 1980s pay roughly £863 a month, while Baby Boomers (born in the 1960s) have been enjoying much lower mortgage costs of £775 on average.
Not surprisingly, the costs are down to a mixture of house price increases far outstripping inflation.
The onset of Autumn has seen the property market rise from its summer slump, figures show.
A report by the Nationwide saw the average UK house price jump 0.7% from August to September, bringing the figure to £266,094.
Not only that, but Zoopla’s House Price Index shows house sales were 25% higher in September than they were at the same time last year, showing the market is beginning to swing in to action for the next quarter.
Zoopla’s Richard Donnell, said: “Market activity is up across the board…We remain in a buyers market and greater choice of homes for sale will keep house price inflation in check into 2025.”
The surge in market activity and pricing has been attributed to the increased number of properties for sale, as well as the prospect of further mortgage interest falls. The latter, together with wages rising higher than inflation, is encouraging formerly hesitant buyers to finally step into the fold.
Second homes freed up for first-time buyers
Around one third of properties recorded are second homes, for which tax changes were introduced in the last budget, making them more expensive to rent out as holiday lets. At the same time, future changes surrounding increased council tax, are also believed to be imminent. There are also suggestions by the government that capital gains tax on second homes will be vastly increased.
Most of the second homes coming on to the market are two-bedroom properties which will appeal to first time buyers and those in their 30s looking to step up the property ladder. Meanwhile, banks are making properties more affordable by increasing the how much they are prepared to lend. Nationwide say it will give first-time buyers up to six times their annual household income. Lloyds and the Halifax have followed suit by both offering 5.5 times household income.
Mortgage rates are lower than they have been for some time, following the Bank of England base rate cut in August. To the extent, many of the big high street lenders are offering five-year fixed rates for less than four per cent. Many analysts are confident rates will continue to fall along with the base rate later this year and into 2025.
You may be in the fortunate position of having some spare cash to invest this week. And wondering, at the same time, where to start the search for your next buy to let property.
Well, it wouldn’t be a bad idea to start focusing on Wrexham, Glasgow, Bristol, Plymouth or The Wirral. For those are the top five properties attracting the most rental attention in the UK right now.
According to Rightmove’s latest Demand Tracker, there are 54 enquiries for every rental property in Wrexham. The Welsh City, whose club is owned by actor Ryan Reynolds – not that there’s a correlation between high rents and the Hollywood star as far as we believe – also led the rental poll last year.
Glasgow isn’t far behind though, with 52 enquiries per rental property. Bristol is one behind with 51, Plymouth has 50 and there are 47 would-be renters for every property in The Wirral. The national average per listing is 19 enquiries.
In term of average rents pcm for the top five rental locations, Bristol is highest with £1,658 and Plymouth next at £1137 pcm. Rents in Glasgow average around £1,078 pcm, it’s £999 in The Wirral and finally, £967 pcm in Wrexham. Overall, average rental prices for houses outside London are currently five per cent higher than they were in 2023.
Why is Wrexham so popular for rentals?
Estate agents in Wrexham (which was awarded city status just two years ago) say it’s the lack of available properties that has led to huge demand. To the extent that one three-bedroom property they had for rent attracted 160 enquiries. They say landlords have been encouraged to leave the market due to new legislation allowing tenants to withhold rent if, for instance, a washing machine is broken or plug sockets don’t work.
Why is there a shortage of rental properties in the UK as a whole?
The rental market is still subdued in terms of both supply and demand. For instance, there are 32 per cent fewer rental properties available than in 2019, prior to the pandemic. That equates with 17 per cent more people looking to rent.
With the belief that capital gains tax may increase considerably in the next budget, more landlords may leave over the coming months. What this means is that for those investors prepared to weather the storm, rental income could increase even higher.
It’s been a tough year for the property sector. Thankfully there were certain measures in the Autumn Budget Statement, announced recently, to swell the heart of property investors. But there were many omissions to moan about too.
One of the biggest boosts to developers was the consultation into permitted development rights which could make it possible to divide one house into two flats. The only stipulation being that the exterior of the property doesn’t change. This could mean big profits for those investors prepared to get their hands dirty and do the development work themselves.
Private rental sector still hugely relevant
The huge demand for private rental properties will continue too, thanks to the chancellor doing nothing to cut Stamp Duty. This fact and the current high mortgage rates make it impossible for many couples to buy their own home.
Jonathan Stinton, Head of Intermediary Relationships at the Coventry Building Society, pointed out that failing to do anything about Stamp Duty changes could result in homebuyers having to fork out an additional £2,500 on an average priced home by March 2025.
Mortgage guarantee scheme extension
First time buyers and current home owners though were thrown a lifeline in the form of an 18-month extension to the Mortgage Guarantee Scheme. This allows them to buy property worth £600,000 with just a five per cent mortgage. And that property doesn’t have to be a New Build.
Having said that, not all mortgage companies were impressed.
Rachael Sinclair, Director of Mortgages and Financial Wellbeing at Nationwide Building Society said she was disappointed that the scheme continues to restrict qualifying loans to 4.5 times income. “Research shows that most homes remain unaffordable through the scheme,” she added.
A plus for property investors is they can now feel more reassured when renting to individuals and couples in receipt of Local Housing Allowance (LHA). That’s because, in the Budget, the Chancellor announced a £1 billion investment into the sector, designed to cover market rents for the bottom 30 per cent.
Cut in self-employed landlord NI
Self-employed landlords – along with much of the population – will benefit from the abolishment of class 2 national insurance. That’s to the tune of £192 per year. Class 4 national insurance is to be cut from nine per cent to eight per cent on profits between £12,570 and £50,270, resulting in a saving of around £350 a year.
One of the big omissions in the budget according to Maria Harris, Chair of the Open Property Data Association (OPDA), was Jeremy Hunt’s failure to implement any real measures to speed up the way homes are bought and sold in the UK today. He ordered just £3 million for pilots to look at proptech development and digitising local council property stats – which compared unfavourably to the £500 million for developing Artificial Intelligence.
Harris added: “The Chancellor stated that the UK’s tech sector has grown to become the third largest in the world, this needs to filter through urgently into the tech and digitisation of the home buying and selling process where all key data is held centrally and can be accessed easily and quickly by every relevant party.”
It currently takes an average of 19 weeks to buy and sell in the UK – that’s 77 per cent longer than back in 2007 according to data from The Landmark Information Group.
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