The Guild London Summer Market Report

Posted on Thursday, June 13, 2024

Momentum is building 

The property market continues its steady recovery. As momentum builds, buyer demand,transaction levels and prices are rising. All eyes are on the Bank of England foranexpectedinterestrate cutduring the second half of the year.

According to ONS data, the UK economy grew by 0.6% between January and March 2024,marking the end of the recession.Inflationhas also fallen tojust 2.3% in the 12 months toApril 2024,which isclose to its 2% target. As a result,the Bank of England is widelyanticipated to cut the base rate imminently. Economists at Capital Economics are forecastingthe base rate to be at 4.5% by the end of 2024, with the first cut expected in August. With theeconomic outlook brightening, consumer confidence in May rose to its highest level since December 2021.

Despite borrowing costs being more expensive than the ultra-low period a few years ago, the recent stability has meant that homeowners can be confident in their ability to afford a mortgage and can benefit when rates do fall. With a widely expected base rate cut alongside the usual spring optimism, almost two-thirds of agents say that buyer confidence has improved compared to three months ago. According to the Bank of England, mortgage approvals reached 61,140 in April, a significant annual increase of 26% and only the second month since August 2022 that approvals have topped 61,000.

Rishi Sunak has announced a 4th July general election. Some fear an election could stall market activity, but this was typically when a significant policy change, such as Mansion tax, was mooted, which isn’t the case this time round. The first interest rate drop is expected to have a larger impact on activity this year. The election is unlikely to interrupt seasonal patterns of transactions, which typically peak in July and August anyway. With Zoopla reporting that the sales pipeline is already 3% higher than this time last year, it's unlikely that buyers already in the process of working to a sale will pull out.

According HMRC, transaction levels continue to recover, having climbed to their highest point since March 2023 and up 9.8% year-on-year. This indicates a reviving property market, as improving economic conditions help ease household financial pressures. Despite mortgage rates remaining elevated for longer than anticipated, pent up demand alongside the usual seasonal boost is driving increased buyer and seller activity. The market is experiencing a sustained uplift in sales, with 13% more agreed than a year ago. The sales pipeline is steadily rebuilding, and the market is on track for close to 1.1 million sales in 2024, a 10% increase on last year.

According to Zoopla data, there are a fifth more homes available than the same time last year, the highest level of supply in eight years. The average agent outside of London now offers twice as many 4+ bedroom homes compared to February 2022, whilst there are 25% more three-bed homes available compared to a year ago, promising news for families looking to upsize. Increased supply is giving potential buyers more choice, however affordability is a key factor affecting budgets.

Nationally, property values are edging up and the market continues to stand firm. The average asking price of homes being listed for sale on Rightmove has climbed by 0.6% year-on-year, reaching a new high of £375,131. However, the market remains price sensitive, with 62% of offers currently being accepted at up to 5% below asking price, with a further 20% slipping to more than 5% below.

Looking at the UK HPI, house prices grew by 1.8% in the year to March, stronger than at any time since April 2023. Detached homes led the way with 2.5% growth year-on-year. A lack of available larger homes for sale during the pandemic years, combined with sharp mortgage rate rises following the mini budget meant that many movers in this sector delayed moving. Buyers are now returning, driving stronger growth in this sector. Semi-detached homes had the second strongest annual growth at 2.2%. Growth was more muted but still positive for lower priced homes, with terraced houses rising by 1.3% and flats by 1%.