The UK housing market is gearing up for a bustling autumn season, fueled by the Bank of England’s recent interest rate cut, the first since the onset of the Covid-19 pandemic. According to an analysis published by property website Zoopla on Wednesday, the stock of homes for sale in the UK has surged by 14 per cent over the past month compared to the same period in 2023, marking a seven-year high.
The nearly two-year period of subdued activity, attributed to elevated borrowing costs as the BoE raised its benchmark rate to a 16-year high of 5.25 per cent to combat inflation, is showing signs of reversal. As interest rates are expected to decrease further, with financial markets anticipating about two additional quarter-point cuts by the BoE this year, Zoopla projects that the number of home sales will conclude 2024 approximately 10 per cent higher than in 2023.
However, Richard Donnell, executive director at Zoopla, cautions that the influx of supply should temper sellers’ price expectations. “With this level of supply, people have got to keep their feet on the ground on price,” he stated, emphasising that affordability pressures, particularly in the wider south of England, will prompt buyers to negotiate prices more assertively.
The proportion of sellers reducing their asking prices by 5 per cent or more remains elevated at around 20 per cent, with these properties taking more than 2.5 times longer to sell compared to those that have not been discounted, as per Zoopla’s findings.
Official figures indicate that house prices rose 2.7 per cent in the year to June, unchanged from May, resulting in an average property value of £288,000. The average five-year fixed-rate mortgage with a 25 per cent deposit has decreased to 4.55 per cent from 5.55 per cent a year ago, with the most competitive rates now slightly below 4 per cent, according to Rightmove’s mortgage tracker.
Despite the anticipated increase in listings and transactions, analysts do not foresee a dramatic decline in mortgage rates, implying that buyers’ budgets will remain constrained. Capital Economics notes that a typical mortgage now accounts for 39 per cent of the median full-time salary, a significant increase from 30 per cent before the Covid-19 pandemic.
The resurgence in listings and transactions is a welcome development for those who encountered difficulties moving during the market downturn, as well as for businesses that rely on property sales, such as estate agents, lenders, and housebuilders. Tony Gambrill, regional sales director at Chestertons, observes that “house-hunters who feel that market conditions have improved overall [with] lower interest and mortgage rates” are driving the demand, which he expects to remain robust well into the autumn season.
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