UK Housing market updates

The first weeks of autumn have seen an increased activity in London’s residential market with more potential sellers requesting valuations, an increase of international investors and home buyers returning to the capital’s prime property, as well as the recent new home developments launches.  Rightmove’s October market overview states “Strong housing market fundamentals and a window of opportunity to buy before a potential interest rate rise keep activity robust despite end of final stamp duty incentive.”  At the time when the demand is still high, because of low interest rates and the change in lifestyle for many, shortage of available property stock is expected to continue to be the main factor driving prices up, although at a steadier pace.

Recently the National Association of Estate Agents stated that “ the average number of house hunters registered per estate agent branch stood at 458 in September - a steady increase from 435 in August and 428 in July.  At the same time, the number of properties being marketed is continuing to hold at 23 per branch in September, the same as in August 2021.” Several leading agents state that although the number of sales agreed has increased, the number of sales achieving over the asking price has been reduced which may indicate an end to the ‘bidding wars’ which has dominated the market.

The Office of Budget Responsibility (ORB) October report predicts that the house prices will go up by 8.6% this year compared to 2020. “ The annual rise would then slow to 3.2% in 2022, before decelerating further to 0.9% in 2023.”  ORB forecasts that the house price rise rate will drop to 3.5% a year by 2026. The ORB report signals strongly at the higher mortgage rates that will follow “a likely interest rate rise, which is widely expected as the Bank of England seeks to control resurgent inflation”.  The most recent inflation figures show prices rose by an average of 3.1% over the past 12 months.  The Bank of England now thinks the figure could go above 4% by December and will stay that high until the spring.

Autumn 2021 budget and property 

New homes, redevelopment of brownfield land and cladding - all found space in the second budget of this year. 

Over the forthcoming years, £24 billion will be invested into building new homes, £1.8 billion to re-develop 1,500 hectares of brownfield land (building 1 million new homes potentially), and £11.5 billion will be invested through the Affordable Homes Programme. The £5 billion cladding fund, also known as 'Building Safety Levy’, has been announced to be partially funded by the Residential Property Developers Tax. This levy will hit developers with profits over £25 million at a rate of 4% over a period of 10 years starting next year. The fund will go to fix cladding issues on high rise buildings above 18 floors. 

Many leading industry figures have expressed disappointment with the latest Budget and Spending Review. They have branded the new homes funding announced as a ‘step in the right direction’, but still from key reforms needed to resolve the housing shortage. Currently, the government is short of in its pledged target to build 300,000 new homes a year.

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