The UK housing market has shown signs of cooling, as revealed by the latest data from Nationwide. House price growth decelerated to 2.4% annually as of October, compared with the 3.2% growth observed the previous month. Month-on-month, prices climbed slightly by just 0.1%, failing to meet the anticipated 0.3% increase.
Despite this slowdown, the overall housing market remains relatively buoyant. According to Nationwide's chief economist, Robert Gardner, mortgage approvals have been nearing levels seen before the pandemic. Gardner attributes this resilience to the solid labor market, which boasts low unemployment and considerable income gains—even when adjusted for inflation.
"Housing market activity has remained relatively resilient, with the number of mortgage approvals approaching the levels seen pre-pandemic, even amid a significantly higher interest rate environment," Gardner stated. The average price of homes stood at approximately £265,738, reflecting slight fluctuations from September's average of £266,094.
The impact of the recent budget is expected to spur increased activity within the housing market. Starting March 2025, the temporary stamp duty threshold of £425,000 will revert to £300,000, prompting predictions of a surge in transactions as buyers rush to secure purchases before the deadline. This situation mirrors previous stamp duty amendments, where buyers hurried to finalize home purchases before tax changes took effect.
Karen Noye, mortgage expert at Quilter, pointed to the budget increase of the stamp duty surcharge on second homes, raising it from 3% to 5%. This measure, aimed at discouraging buy-to-let investments, could inadvertently create challenges for rental property availability, potentially pushing rents higher, especially where demand remains strong.
"While this could reduce competition for primary homes, it may exacerbate the rental market's issues," Noye noted. The impending cutoff for the current stamp duty threshold also creates urgency for first-time buyers, who may feel pressured to act swiftly to avoid higher taxes.
On the lending side, competition among mortgage providers has been observed to increase, as lenders offer more attractive mortgage rates to entice buyers. Mark Harris, CEO of SPF Private Clients, remarked on the current market dynamics, outlining how lenders are adjusting their offerings following changes to swap rates. He emphasized the importance of keeping watch on market reactions.
Real estate agents have also reported mixed sentiments among buyers. Amy Reynolds from Antony Roberts shared observations around increased property fall-throughs linked to buyer apprehension surrounding the economic climate. "The ‘wait and see’ approach we have seen from some buyers, who have been more cautious than usual, may start to ease now the budget isn't as dramatic for property as previously feared," she shared.
Meanwhile, Jeremy Leaf, another estate agent based in North London, foresees heightened demand for smaller properties as first-time buyers anticipate increased competition from potential investors impacted by the recent stamp duty changes.
Tomer Aboody from MT Finance highlighted the recent uptick in house prices as indicative of mounting confidence within the market, attributing this growth to falling interest rates and favorable inflation data. He affirmed, "With mortgage rates becoming more affordable, borrowers may feel encouraged to enter the market, especially amid the budget’s potential influence on future rate movements."
Economists and analysts agree on the potential for the housing market to exhibit gradual strengthening moving forward. Many foresee factors such as continued wage growth and easing affordability constraints contributing to increased activity. Nonetheless, it is suggested to maintain caution as external economic conditions remain unpredictable.
Overall, the data presents a nuanced picture—a market still on the rise but under the influence of changing policies and broader economic factors. The upcoming months could prove pivotal as buyers navigate the shifting terrain of the property market, driven by policy changes and their own economic circumstances.
