Market performance has picked up over the summer. A combination of a stable economy, greater clarity in government policy, and an uptick in consumer housing demand has spurred growth in the property industry, so much so that Richard Hughes, a commercial property team member at Moore Barlow, has remarked that ‘we could be on the cusp of a revitalised property market.’ Such confidence is likewise reflected by consumers in a recent survey conducted by Ready Steady Store, in which nearly 40 per cent expressed positivity that the property market will improve under the present Labour government.
To situate this renewed optimism in its proper context, let’s take a look at the performance metrics of the property market over the past few months.
Interest Rates
The most striking event occurred on 1 August, when the Bank of England dropped interest rates for the first time since March 2020 from 5.25 per cent to 5 per cent. Bank of England Governor Andrew Bailey has commented that ‘we need to make sure inflation stays low […] ensuring low and stable inflation is the best thing we can do to support economic growth and the prosperity of the country.’
This reduction not only eases the hardship of existing mortgage holders; it also sets the terrain for increased consumer activity in the property market. Reducing interest rates indicates boosted confidence among financial experts in the stability of the market, which had previously been the central issue preventing slashing rates at previous committee meetings. Signs of this confidence were being felt prior to the Bank of England cutting interest rates. NatWest, Santander, and Halifax have recently cut interest rates up to 0.20 percentage points, while Nationwide has reintroduced sub 4 per cent fixed-rate mortgages.
Holly Tomlinson, financial planner at Quilter, pointed out that these conditions could ‘start to heat up’ the property market. Given this trajectory towards easing interest rates, the incentive to acquire property has improved significantly, not least with Reuters identifying that investors are placing a 33 per cent chance that the Bank of England will lower interest rates by another quarter point in September.
House Prices
Another development is the increase in property prices. A recent study has pointed out that the year-on-year house prices increased by 2.3 per cent (£291,268), with the most recent increase of 0.8 per cent (£2,200) between June and July.
Looking at regional prices shows there has been a general increase felt across the nation. In a study conducted by Halifax, the annual change was observed in the increased average property prices in regions such as East Midlands by 0.6 per cent (£239,448), Greater London by 1.2 per cent (£536.052), Wales by 3.4 per cent (£221,102), and North West by 4.1 per cent (£232,489). The only exception to this trend was Eastern England, a region which has dipped by -0.4 per cent (£330,282).
Amanda Bryden, the head of mortgages at Halifax, observed that ‘against the backdrop of lower mortgage rates and potential further base rate reductions, we anticipate house prices to continue a modest upward trend throughout the remainder of this year.’ In turn, the present house price data indicates healthy growth in key regions of the country.
Property Exchanges
A major Labour manifesto pledge is to inject 1.5 million new properties into the market by the end of the parliamentary term. Such a long-term commitment has been useful in facilitating market confidence, confidence which is being felt in the increased property transactions and new listings.
Property Eye has identified that the previous week has seen 19,300 net sales, 27.8 per cent higher than the same week in 2023, while there have been 35,115 new listings, 7.5 per cent higher than in the same week in 2023. Moreover, RICS has identified new buyer enquiries have increased by 0.2 per cent, up from -6 per cent the previous month, and near-term sales expectations by 30 per cent, the highest since January 2020.
One final study by Knight Frank underscores the rejuvenated consumer participation in the market, with property exchanges in London during June and July being 8.4 per cent higher than the five-year average. Tom Bill, head of UK residential research at Knight Frank, described this moment as a ‘release of pent-up demand following 12 months of frustratingly high inflation.’
Conclusion
The data is promising: it points towards a renewed confidence exercised by consumers, landlords, and property experts. Broader economic conditions have stabilised. Lower interest rates have eased the financial stress that has encumbered the property market.
What is exciting about these results is that they indicate that the market is turning a decisive corner. Along with more favourable mortgage scheme rates, the metrics show healthy increases in property prices and exchanges. Provided these metrics remain firm, the property market is entering an exciting time, its potential being a point of interest to keep up-to-date over the coming months.
