Homesellers prepare for an autumn surge
Making sense of the latest trends in property and economics from around the globe
3 minutes to read
Central bankers in many markets have started cutting interest rates and the relief is almost palpable.
Home sellers and purchasers are tuned in to the economics after years of volatility. The stock of UK homes for sale climbed 14% in August compared to the same period a year earlier as people put previously delayed plans into action, according to Zoopla figures out today.
Autumn will be busier, but overexuberance could be costly for sellers. A fifth of homes on the market have had their asking prices cut by 5% or more. Properties subject to price cuts tend to take 2.5 times longer to sell than properties that were priced correctly at the outset.
We updated forecasts for house prices this week, leaving the numbers unchanged from our May outlook. We still think UK house prices will climb 3% this year and next as mortgage rates drift south. The pace should pick up from 2026 onwards.
Prime markets
The outlook for prime markets looks a little more complex. These markets have a higher proportion of cash buyers. However, mortgage rates still move the needle, particularly when rates fall below 4%.
“When rates get into ‘the 3s’ wealthy people figure: after tax I can make more than that on my money, so it’s sensible to borrow again,” Simon Gammon of Knight Frank Finance told the FT over the weekend.
The prospect of the Budget is the largest source of uncertainty - see Tom's Bill's piece for details. Our prime central London (PCL) forecast is subject to a larger revision than our other projections later this year. The annual decline was -2.4% for the third successive month in July, which we forecast will narrow to -1% by December.
Any impact would be less marked in prime outer London (POL), where we forecast an increase of 2% this year. Average prices in POL rose 0.6% in the six months to July, putting them on track for a low single-digit increase for the calendar year.
The rental market
Like prime sales markets, our rental market forecasts appear broadly on track, but once again, legislative uncertainty clouds the outlook.
The Labour government will introduce its own version of the Conservative Party’s Renters Reform Bill during this Parliament, and it has been talking tougher on landlords. Again, there is more detail in Tom's piece, but this is an issue that ministers will likely seek to handle carefully.
We've talked in previous notes about the impact of landlords exiting the sector amid an increasingly unfavourable tax and policy environment. Consultancy TwentyCi reckons the number of properties available to rent nationwide is down by a quarter since 2019.
This is an issue that could have dramatic consequences for the capital. A little more than a fifth of all newly listed homes for sale in inner London have been available to rent at some point in the last decade, TwentyCi revealed yesterday. That's a ten-year high for that metric.
Affordability
The combination of rising rents, mortgage rates at prevailing levels and the prospect of rising house prices will have dire consequences for people at the bottom of the property ladder.
Tapping family members for a deposit has become the norm. Legal & General and the Centre for Economics and Business Research estimate that support from families is expected to contribute to an incredible 42% of all properties purchased by buyers aged under 55 this year.
The research, shared with the Times, indicates that families will hand over a record £9.2 billion this year, up from £8.1 billion last year. That will take the average contribution to £27,400, up from £25,600 last year.
In other news...
Keir Starmer seeks to ‘turn corner’ on Brexit with German deal (Times), and finally, Americans keep agents busy in prime central London (Bloomberg).