Welcome to the March edition of the Property Market Update! 

News at Cameron King | 12/03/2024

Welcome to the March edition of the Property Market Update

On Wednesday 6th, Chancellor of the Exchequer, Jeremy Hunt, announced the Government’s Spring Budget. In an hour-long session, the Chancellor covered a lot of ground - but in this update, we bring the focus back to property.

Average house prices are just 3% behind their all-time high of summer 2022 according to Nationwide, citing an increase of £2,764 in average house prices to £260,420 (February.) Halifax continues this positive trend, with average house prices up by 0.4% in February, the fifth monthly rise in a row. According to the bank’s data, the average UK property is £291,699.

Mortgage rates have risen marginally since last month, with the average two-year fixed rate now 5.74%, and the average five-year fixed rate, 5.18%, according to Asset Plus 

Spring Budget: Main Points

Last Wednesday, Chancellor Jeremy Hunt presented the Government’s Spring Budget to the House of Commons. The budget was pretty broad, but we’ve narrowed down the bits concerning property:

  • Multiple Dwellings Relief abolished: People who purchase more than one dwelling in a single transaction can no longer claim Stamp Duty relief
  • Furnished Holiday Lettings regime abolished: Second homeowners can no longer deduct mortgage interest from their rental income or pay lower CGT when they sell
  • Higher rate of Capital Gains on property sales drops: To stimulate the housing market, the higher rate of CGT drops from 28% to 24%. It’s worth noting that you only pay CGT on second homes

The Government's decision to eliminate Multiple Dwellings Relief and Furnished Holiday Lettings is essentially redistributing the tax burden onto wealthier individuals to fund their widely publicized tax reductions. For individuals who do not own multiple properties, these changes may not have a significant impact. While there were criticisms regarding the Government's response to the ongoing housing crisis, many experts anticipated that tax incentives would be a key focus of the Spring Budget.

With the possibility of a Labour government in the future, there is speculation about the extent to which Labour will fulfill its promise to construct a substantial number of new homes.

Average house prices continue to grow despite growing regional disparity

Nationwide reported that average house prices are just 3% behind their all-time high in summer 2022 citing an increase in average house prices from £257,656 (January) to £260,420 (February). Halifax continues this positive trend, with average house prices up by 0.4% in February (£291,699), their fifth monthly increase.

On a regional scale, prices are falling in five regions but rising in 7, according to Zoopla. Five regions in the South are seeing prices fall, with the East of England leading the way at -2.1%. However, house prices are rising in the remaining four regions of England, as well as Wales, Scotland and Northern Ireland.

Asking price reductions remain above average

The regions of South East England and the East of England are currently witnessing the highest number of asking price reductions of 5% or more. While there are fewer reductions than at this time last year, they still surpass the average. The main drivers behind these reductions are the increased mortgage rates and the overall cost of living.

As previously highlighted, these regions were once in high demand during the pandemic's 'race for space'. Both second steppers and first-time buyers are now favoring smaller properties, indicating a more prudent decision-making approach.

Mortgage rates stabilise around four to five percent

Average mortgage rates rose in February, but only slightly. According to Asset Plus, the average two-year fixed rate mortgage is up 0.21% (5.56% to 5.74%), whereas the average five-year fix is up 0.11% (5.18% to 5.29%). 

The gradual decrease in rates observed from November to January has come to an end. While there may be some additional price reductions as providers compete with each other, it is improbable that they will exceed 4%. Despite interest rates still stabilizing, recent data from the Bank of England reveals a 7.2% increase in mortgage approvals for house purchases in January, totaling 55,227 approvals. Compared to January 2023, this year's January figure represents a significant 40.2% rise, indicating a stronger consumer confidence.

The upcoming Bank of England Monetary Policy Committee (MPC) meeting is scheduled for the 26th March 2024. During this meeting, we will learn whether the MPC is considering lowering the base rate, although it is unlikely at this early stage of the year.

Summary: Spring time 

Remember, March typically experiences the highest competition for available homes, making it the most favorable month for selling. This aligns with the well-known belief that Spring is the optimal time to list your property for sale. Take this information into consideration as you plan your next steps. 

Thank you for reading, and we look forward to providing you with more market updates next month.