After weeks of planned leaks and endless speculation, the UK was finally spared further conjecture with the delivery of Chancellor Rachel Reeves’s historic budget. For buyers and sellers poised to make a move but conflicted about which direction to take, the budget reassured investors fearful of capital gains increases for second homes but stung investors about to complete on a purchase. The motivation to sell is now in place, but buyers are divided. Financially able first-timers are aligned with sellers, helped by the ticking stamp duty threshold clock due to go off in April 2025, but established investors may scale back purchasing plans with additional stamp duty now due while non-doms look for greener pastures. Welcome to another UK Property Recap – 01.11.2024.
Zoopla HPI for October 2024
According to Zoopla’s HPI for October 2024 – 36% of agreed sales were a result of first-time buyers keen to switch from the rental to sales line before prices (up 2% YOY) and stamp duty increase before the end of March 2025. This section of the market helped boost the total value of homes in the sales pipeline to £113 bn, up 30% YOY. The northern lines showed the biggest increases in pricing.
Buy-to-Let Rates struggle to capture investor intention
Buy-to-let product availability has increased as rates tiptoe down in the hope of attracting investors who’ve moved on. Rates may have remained below 6% during 2024, but they still have some way to go before they look attractive to the masses.
Money and Credit September 2024
Mortgage approvals in the Bank of England’s Money and Credit for September 2024 tiptoed up to 65,000 as interest rates tiptoe down by 8 basis points, to 4.76% in September 2024. This shift spurred an extra 30,800 looking to remortgage to tie in a new rate with their existing lender.
Foxton branches out
Foxtons Group PLC “branched” out to commuter towns Reading & Watford by acquiring Haslams Estate Agents and Imagine Property Group for a total initial consideration of £12.6 million.
The OBR property predictions post-budget
The Office of Budget and Responsibility expected house price growth to fall back slightly from 1.7 % in 2024 to 1.1% in 2025, as the average effective mortgage rate continues to rise from around 3.7% in 2024 to a peak of 4½% in 2027.
Transaction volumes are anticipated to pick up in the short term before slowing, marginally, in the medium term.
In contrast, new additions to housing stock are expected to remain sluggish in the short term, only increasing from 100,000 in 2024 to 160,000 by 2029.
For non-doms, the fiscal watchdog predicts a further 5% with offshore accounts to now move further afield as a result of the latest budget.
The Budget Property Breakdown
Stamp Duty:
Rachel Reeves opted to increase Stamp Duty from 3% to 5% for second homeowners and landlords instead of raising Capital Gains on sales. As a result, the chancellor has made it more attractive for investors to sell rather than buy. At the same time, the immediate implementation will cause some transactions to fall out of bed and others to be renegotiated.
The amount of rental stock investment could diminish from established, more corporate landlords, who would have increased their portfolios while stubbing out individual pension pot investors. This will replenish the property portals’ stock levels, enabling more choice for homebuyers, which in turn could decrease prices in certain pockets of the market while maintaining elevated rental prices as choice is reduced.
Moving forward, the profit or benefit will have to outweigh the additional cost for investors.
First-time buyers:
The Government has opted to increase stamp duty from April 2025, which will drive up sales from first-time buyers in the short term, looking to beat the clock.
Less competition from investors and more ex-rental stock may soften prices but in the short term, prices could continue to rise as buyers jostle for homeownership.
The top of the market:
Prices will be hit hardest here, as sellers look to move further afield to more tax-efficient pastures while buyers seek out larger discounts to compensate for any increases in taxation.
Affordable Housing:
The additional £3.1bn for the Affordable Homes Programme to boost funding to build more homes is welcomed but how “affordable” they will be, remains to be seen.
The £3bn funding support for small developers and the build-to-rent sector via housing guarantee schemes will increase construction if the rates are competitive and buyers can afford the process tag.
The decision to reduce Right-To-Buy discounts to enable local authorities to reinvest the full receipts from any sales in new social housing is a good decision. Likewise, increasing social rents makes sense to comfort investors but will only work if renters can afford the settlement of the Consumer Price Index + 1% for the next five years.
UK Residential Transactions Tiptoe Up
Budget whispers and interest rate expectations restrained the big transaction comeback for the autumn term. Transactions volumes when seasonally adjusted were estimated to have increased by 9% to 91,820 in September 2024 when compared against September 2023. However, when non-seasonally adjusted, UK residential transactions in September 2024 were only 2% higher than September 2023 (94,800), and 9% lower than August 2024.
Nationwide HPI October 2024
UK house price growth was restrained by budget concerns causing the average price of a home to winch itself up by only 0.1% from September to October 2024 to £265,738 according to Nationwide’s latest HPI for October 2024. Should swap rates remain elevated, expect further resistance to significant growth.
And that concludes another UK Property News Recap – 01.11.2024. If you have any comments or suggestions, please get in touch here
