HOUSE PRICES UPDATE: the forecast is bright
News from property price indices is positive, writes Kate Faulkner, and indicates we are as 'near' to normal as we have been in years.
Well, the sun is shining and although there are some clouds and rain in some areas, most of news from property price (and rental) indices this month are good.
The economic indicators are as near to normal as we’ve seen for a long time. The Bank Base Rate (BBR) is still higher than expected, but at 4%, this is enabling lenders to offer mortgage rates at a lower rate, normalising the mortgage market before the BBR has adjusted to a hopefully long term norm of around 3% in 2026.
And, although the BBR is still slightly high versus the last 17 years, so is wage growth, helping to ensure the higher rates are still affordable for many.
This is positively impacting on property prices and transactions, both of which are ‘near’ normal. TwentyEA came out with a latest prediction of transactions returning to the 1.2m norm, forecasting 1.18m transactions for 2025.
Although I think we might hit the 1.2mn, lots of people who have held off buying since 2022 I think will start looking again in September and, because of the falls since 2022, property is not bad value for money and in areas in the south, prices are lower for many properties than they were three years ago.
Lettings wise, we are into a new era. Less properties – especially in the South where renting is typically a higher proportion of the sector – is likely to help rental inflation hit a ‘new norm’ of 3-4% growth per annum versus the long term norm of 2%.
And, although in some areas, rental stock has declined, this is good news for most landlords who remain invested as there is a good opportunity to earn more real income than in the past.
So landlords and agents who understand property returns and let properties legally and safely, have little to fear about the up and coming Renters Rights Bill and could financially benefit.
Property price and market indices headlines
Savvy summer sellers drive best July for sales agreed since 2020
“The average price of property coming to the market for sale drops by a seasonal 1.3% (-£4,969) this month to £368,740. August’s price drop is in line with the ten-year average following the bigger than usual falls in June & July.”
Sales market conditions remain challenging with previous signs of recovery faltering somewhat
“Buyer demand and agreed sales measures fall back into negative territory.”
Annual house price growth edges higher in July
“Annual rate of house price growth increased modestly in July to 2.4%, from 2.1% in June.”
House prices rise in July
“House prices increased by +0.4% in July, the highest since the start of the year.”
On track for a gentle recovery?
“Lower interest rates through second half should aid prospective buyers and strengthen market fundamentals.”
Sales market activity is seasonally strong for July
“Buyer demand 11% higher than a year ago with 8% more sales agreed.”
Kate’s commentary on the indices
The indices for this month highlight, I think, the differences in timing that property price data is being presented and commented on. Rightmove and Zoopla are the most recent, and both of their views of the market are positive.
Rightmove: The best July for sales agreed since 2020’s active post-lockdown market.
Zoopla: Sales market activity is seasonally strong for July.
Whereas RICS and E.surv are suggesting a more difficult market:
RICS: Sales market conditions remain challenging with previous signs of recovery faltering somewhat.
E.surv: The only index showing property prices mainly in negative territory (-2.2%).
To be fair to RICS, they do have a good track record of predicting and tracking the actual market and it’s worth bearing in mind that their experts are forecasting: “Over the coming three months, respondents expect prices to remain under a small degree of downward pressure at the national level.”
I think we are looking at a pretty good property market for the rest of the year, depending on the debate and realities of what happens to Stamp Duty.”
Overall though, I think we are looking at a pretty good property market for the rest of the year, depending on the debate and realities of what happens to Stamp Duty Land Tax in the run up and post the budget. Never a dull moment in property!
Summary of the insights from this month’s indices
– Savvy summer sellers are pricing realistically to attract holiday-distracted buyers. Lower asking prices and good buyer choice are continuing to boost sales activity, resulting in the best July for sales agreed since 2020’s active post-lockdown market.
– The number of sales being agreed is now 8% ahead of this time last year as serious buyers and sellers lock in deals.
– The number of homes for sale is now 10% up on this time last year muting the annual price increase to just 0.3%
Colleen Babcock, property expert at Rightmove, writes in the latest report: “Sellers should note that 34% of homes are now seeing a reduction in price during marketing. In data that goes back to 2012, this figure has only been higher at this time of year in 2023, and a two-speed market is becoming more evident.
“The overall average time to find a buyer is now 62 days, with the high number of homes for sale allowing buyers the time to make their choice and negotiate. However, if a home is priced right from the outset and doesn’t require an asking price reduction, the average time to find a buyer is 32 days, whereas if a home does need a reduction in asking price, this more than triples to 99 days.”
– House prices were up 0.6% month on month, after taking account of seasonal effects.
– UK house price to earnings ratio at lowest level in over a decade at c.5.75.
Robert Gardner, Nationwide’s Chief Economist: “Looking through the volatility generated by the end of the stamp duty holiday, activity appears to be holding up well. Indeed, 64,200 mortgages for house purchase were approved in June, broadly in line with the pre-pandemic average, despite the changed interest rate environment.
“Providing the broader economic recovery is maintained, housing market activity is likely to continue to strengthen gradually in the quarters ahead.”
– Average property price now £298,237 compared to £297,157 last month
– Annual rate of growth +2.4% (vs +2.7 in June).
– Northern Ireland continues to record the strongest annual price growth in the UK.
Amanda Bryden, Head of Mortgages, Halifax: “The second half of this year will also see a notable rise in homeowners coming to the end of fixed-rate deals taken out during the pandemic-era property boom; a period marked by ultra-low interest rates and soaring house prices.
“While most borrowers coming to the end of five-year fixed-rate mortgage deals will see their monthly repayments rise, the extent of this will vary across households. Those coming off a two year fixed-rate are very likely to see their monthly payments come down, as they originally locked in rates during the peak that followed the 2022 mini-budget.
“We’re unlikely to see a significant impact on house prices, but it may influence market dynamics if prospective home movers choose to delay plans as a result of tighter budgets.”
– Affordability pressures in the South East and across southern England more broadly have held the market back for some while.
– High stock of properties for sale has prompted recent price weakness.
Rob Owens, Head of Research: “..rising real incomes and improving sentiment suggest the market may be entering a period of gentle recovery. With further rate cuts expected and no major policy interventions on the horizon, the second half of the year could offer a more stable footing.”
– Sales market activity is seasonally strong for July.
– Market activity is higher across all regions and countries of the UK.
– Changes to mortgage affordability testing are supporting demand.
– Increased activity is not leading to faster house price inflation.
– House price inflation slowing across country – UK rate +1.3%.
Richard Donnell, Executive Director – Research: “The UK housing market is defying seasonal norms this July, presenting unique opportunities and challenges for agents and housebuilders. Our latest House Price Index unpacks unexpectedly high demand, surging sales volumes and record supply in the current market.”
