What’s driving the UK property market this autumn?

As autumn unfolds, the UK property market is once again under the microscope. Homebuyers, sellers, and investors are keenly watching market trends, eager to understand what factors are influencing property values this season. One crucial tool in this analysis is the house price index, which offers insights into the fluctuations and dynamics of house prices across the nation. By delving into various economic indicators and market behaviours, we aim to provide a comprehensive overview of what’s currently driving the property market in the UK.

View from the Bank of England

The Bank of England holds considerable sway over the UK’s economic environment, and its decisions are pivotal to the property market. This autumn, their monetary policies, particularly regarding interest rates, are especially influential. With interest rates currently maintained at relatively low levels, the Bank’s strategy has been to encourage borrowing, thereby fuelling demand in the housing sector.

There is growing speculation that the Bank of England might reduce interest rates in November, following recent comments by its governor. The Bank lowered rates from 5.25% to 5% in August, marking the first reduction in over four years. This move has already spurred increased buyer interest, according to UK estate agents. Another rate cut could further benefit buyers, sellers, and estate agents alike. A Reuters poll recently indicated that nearly 80% of economists expected one more rate cut this year, although this was before the governor’s latest remarks. The Bank still has two meetings left this year, in November and December, to make any further decisions on interest rates.

Are buyers on the rise?

Recent data suggests a notable surge in the number of buyers entering the market, especially as we delve into the demand side of the property equation. Mortgage approvals have climbed to their highest levels in two years, with August seeing an impressive 64,900 mortgages approved for house purchases, highlighting renewed buyer interest. This increase may be attributed to several factors, including a sense of stability within the market, attractive mortgage offers, or a fear of potential future interest rate hikes.

According to Zoopla’s latest House Price Index, homebuyers are benefitting from the lowest average mortgage rates in 15 months, which is bolstering significant growth in sales market activity. Annual house price inflation remains positive but is still under 1%. Nationally, buyer demand has surged 26% compared to this time last year, driven by an increase in property listings and sellers seeking new opportunities.

The average rate for a new five-year 75% LTV mortgage is now 4.3%, down from 5.5% a year ago, marking the lowest rate since May 2023. Intense competition among lenders is keeping rates attractive, especially for buyers with substantial equity. The number of sales agreed is 25% higher than last year, as many households that had postponed moving decisions over the past two years are now entering the market. Sales have increased by over 10% across the UK.

The renewed interest among buyers is significant, indicating a vibrant market. As more individuals secure mortgages and step into the property market, their participation fuels ongoing demand, which in turn impacts property values. This dynamic is a key driver in the current market, showcasing a blend of opportunity and urgency among buyers.

Is inflation having an impact?

Zoopla’s House Price Index indicates that increased sales activity is contributing to modest price rises rather than driving any rapid escalation in home values. Across the UK, annual house price inflation has risen to +0.7% from -0.3% a year ago and is expected to continue improving gradually in the coming months. House price growth is stronger than it was a year ago, with prices now up to 2.5% higher.

Rising sales volumes are being bolstered by an increase in the number of homes available for sale, which is up 12% compared to this time last year. Many of these homes are new listings from homeowners looking to sell and buy another property. However, not all listings are entirely new to the market; one-fifth of homes currently for sale were previously on the market over the past two years.

Although market conditions are improving, setting the right price remains crucial to attracting buyers. This is particularly true for the fifth of homes that have been on the market for more than six months without selling. This explains why a similar proportion have reduced their asking prices by 5% or more to entice buyers. These trends illustrate that buyers are still price-sensitive as their choices expand, and sellers must price their homes sensibly to secure a sale.

Future predictions and market outlook

As we peer into the future of the UK property market, several elements suggest a cautious yet hopeful trajectory. While recent activities have shown an uptick, Robert Gardner, Nationwide’s chief economist, notes that “while activity in the housing market and prices had picked up, they remained subdued compared with historical standards”. This indicates that although there’s positive movement, it’s not as robust as in previous cycles.

Zoopla’s latest House Price Index reveals a mixed but cautiously optimistic picture. Rising sales volumes and modest house price inflation signal a market that is regaining its footing, albeit slowly. New buyers continue to enter the market, making sensible offers on well-priced homes, indicating sustained interest and activity.

Sellers, on the other hand, are eager to secure the best possible price to facilitate their next move. However, buyers remain price-sensitive and benefit from a wider choice of properties. While sale prices have stabilised, nearly 2 in 5 transactions (37%) are still being agreed at more than 5% below the asking price. This demonstrates the ongoing negotiation power buyers possess in the current climate.

The market’s outlook is more positive than it was a year ago. Nonetheless, sellers must remain realistic about pricing to achieve timely sales. Overall, the market is showing signs of resilience and gradual improvement, but a cautious approach remains essential for all stakeholders.

For those involved in the market, whether buying, selling, or investing, staying well informed and adaptable will be essential. Monitoring key indicators, such as the house price index, will help stakeholders navigate the market effectively, making the most of emerging opportunities.

To discover more about what is happening in the Chelmsford market, call 01245 835859.