Increase in UK asking home prices surpasses average levels, amidst continued Budget uncertainties
The UK property market in 2021 was braced for change as the Autumn Budget approached, with a mix of uncertainties and potential opportunities looming.
Borrowing costs and buyer confidence were on the rise, thanks to the Bank of England's August interest rate cut to 0.1%, making borrowing cheaper for buyers with variable or tracker mortgages. This positive trend continued leading up to the Autumn Budget.
However, discussions around potential tax changes, such as reforms to Stamp Duty Land Tax (SDLT) and property-related taxes, were expected to have significant repercussions. Proposals for overhauling or abolishing Stamp Duty could lower barriers to moving home and boost market activity, but no final decisions had been made ahead of the Budget. Meanwhile, uncertainty about inheritance tax rules was making buyers hesitant, as speculation about possible tax hikes could temporarily inflate prices or stall market moves.
Businesses and commercial property sectors faced increased costs due to the Budget, with business rates, employer National Insurance contributions, and reduced business energy support all adding pressure.
Despite these challenges, the housing market showed signs of improvement, with forecasts for house price growth being revised downward due to higher mortgage rates and greater supply levels. Analysts suggested that modest price growth (1-2%) might continue, driven by sustained buyer demand as schools returned and new affordability rules were considered. However, longer-term regional variations and policy shifts from the government would influence the market’s trajectory.
Early autumn movers were reaping the benefits, with the number of new sellers up by 14% compared to the same time last year. The latest Rightmove House Price Index showed a 0.8% increase this month and a 1.2% annual rise, with the average UK asking price now standing at £370,759, an increase of £2,974. Sales agreed were up by 27% year-on-year, according to Rightmove, but the market remained cautious, with homes taking an average of 60 days for a seller to find a buyer.
Home-owners had to price competitively to sell, as affordability remained stretched for many buyers. Mortgage rates continued to drop, providing some relief, and value-conscious buyers were taking their time to find the right home at the right price.
The October Budget was a critical moment that could either alleviate or exacerbate market pressures. Lower borrowing costs prior to the Budget offered a window of opportunity for buyers and sellers, but uncertainty over tax policies and economic measures was tempering confidence. Market participants were advised to watch for policy announcements closely and seek tailored advice as the government’s financial plans unfolded.
However, there were also concerns that the Budget would raise taxes, particularly for landlords looking to add to their portfolios. With these uncertainties, the property market in the UK continued to navigate a complex landscape, with the Autumn Budget's impact still unfolding.
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