Two big driving forces could be at play , but your clients should be more active
UK house prices saw a significant rise in September, growing at double the long-term average rate as home-sellers reacted optimistically to the Bank of England’s first interest rate cut in over four years. According to Rightmove, the average asking price for homes increased by 0.8% to £370,759. While this type of increase is common in September, the size of this jump points to the impact of lower borrowing costs and a rise in available properties, which has unlocked pent-up demand.
The recent interest rate cut on August 1 has helped improve affordability for buyers, as easing mortgage costs and rising real incomes make purchasing a home more viable. The Bank of England meets again this week to discuss rates. Rightmove also reported that estate agents have the highest number of available properties since 2014, leading to a 25% increase in agreed sales compared to last year. “The autumn action has started early with a strong rebound in activity from both buyers and sellers compared to the subdued market at this time last year,” said Tim Bannister, Rightmove’s director of property science.
Adding to the market’s activity is growing speculation about changes to capital gains tax (CGT) in the upcoming October budget. Rightmove reported a “flurry of activity at the top end” of the market, with listings for larger homes—such as four-bedroom detached houses and five-bedroom or larger properties—rising by 15% compared to last year. In regions like the east and southwest of England, the increase was over 20%. This surge is attributed to homeowners rushing to sell before potential CGT hikes that could affect second homeowners and landlords. "Another factor is increasing speculation around a CGT rise," Rightmove noted, with many looking to “cash out now” to avoid potential tax burdens. Listings of higher value houses will obviously drive up the average house price listed by Rightmove.
The possibility of CGT changes comes as Chancellor Rachel Reeves faces mounting pressure to address a £22 billion budget shortfall. The Resolution Foundation think tank has urged Reeves to raise funds through CGT and other tax reforms in the October 30 budget, prompting homeowners to act before the new measures are introduced. Nathan Emerson, CEO of Propertymark, emphasised the uncertainty ahead of the budget, telling The Independent, “It is important to consider what effect the budget at the end of next month may have on the housing market.”
Despite the uncertainties, the housing market shows resilience. House prices are now 1.2% higher than they were a year ago, according to Rightmove’s data. The Royal Institution of Chartered Surveyors (RICS) also noted increased buyer demand and sales activity, while both Halifax and Nationwide highlighted the strength of the property market in recent surveys. RICS chief economist Simon Rubinsohn, however, cautioned that ongoing uncertainty around interest rates and the budget is tempering enthusiasm.
The construction of new homes is also ramping up, with activity growing at the fastest pace in nearly two years. This uptick in construction supports Prime Minister Keir Starmer’s ambitious plan to build 1.5 million homes over the next five years.
In a positive sign for first-time buyers, Halifax recently named Manchester the “first-time buyer capital of Britain,” with 75% of home purchases with mortgages in the city being made by first-time buyers in the last year. Santander’s analysis of the most popular areas for first-time buyers included Waverley in Surrey, Waltham Forest in London, and Bassetlaw in Nottinghamshire, all of which have seen substantial growth in first-time buyer activity over the past decade.
However, even as the housing market shows signs of recovery, buyers remain price-sensitive. Rightmove revealed that the average time to secure a buyer has increased to 60 days, three days longer than last year. While mortgage rates have fallen, with the average five-year fixed rate now at 4.67%, it remains well above the rates seen three years ago, which adds a layer of caution to buyers’ decision-making.
As the market moves toward autumn, experts believe that demand will continue to grow, especially if more mortgage rates fall below the 4% threshold. However, all eyes are on the October 30 budget and the potential tax changes that could reshape the housing landscape in the months ahead.
