Growing uncertainty over next month’s Budget is stifling capital appreciation according to a leading estate agent.
Tom Bill, head of UK residential research at Knight Frank, says: “High levels of supply and a growing sense of uncertainty as November’s Budget approaches are both keeping downwards pressure on demand and prices. Stable mortgage rates so far this year have encouraged buyers to act but a repeat of last year’s game of ‘guess the tax rise’ ahead of the Budget means hesitancy will rise over the next two months, which prompted us to recently downgrade our 2025 UK forecast to 1% from 3.5%.
“As it increasingly becomes a buyer’s market, sellers will need to be realistic with asking prices to get buyers through the door for a viewing.”
His comments come in the wake of the latest house price index from the Nationwide.
This shows that the annual pace of UK house price growth was little changed in September at 2.2%, marginally stronger than the 2.1% recorded in August. Prices increased by 0.5% month on month, after taking account of seasonal effects.
The broad stability in the annual rate of house price growth over the past three months mirrors that of activity. The number of mortgages approved for house purchase have been hovering at around 65,000 cases per month, close to the pre-pandemic average (despite the higher interest rate environment).
Nationwide chief economist Robert Gardner says: “Despite ongoing uncertainties in the global economy, underlying conditions for potential home buyers in the UK remain supportive.
“Unemployment is low, earnings are rising at a healthy pace, household balance sheets are strong and borrowing costs are likely to moderate a little further if Bank Rate is lowered in the coming quarters as we, and most other analysts, expect.
“Providing the broader economic recovery is maintained, housing market activity is likely to strengthen gradually in the quarters ahead.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says in response to the Nationwide data: “As our supply of listings start to slow a little in response to worries about the Chancellor’s Budget intentions for property taxes so the pressure on prices has eased. As a result, with some values softening, still-motivated buyers are seeking to second-guess possible increased costs.
“Looking forward, low unemployment as well as earnings still rising faster than inflation and house prices overall means we can look forward to a relatively-strong bounce back once the uncertainty is over.”
Meanwhile Alice Haine, analyst at BestInvest by Evelyn Partners,comments: “While buyers are gradually adjusting to the stamp duty changes introduced in April, when thresholds reverted to their previous, lower levels, a new wave of uncertainty is emerging around what property tax measures the Chancellor may target in her fiscal statement on November 26.
“Proposals reportedly under consideration include a new national sales levy to replace stamp duty, council tax reform and capital gains tax applied to the sale of high-value residences. Even landlords, already under pressure from higher taxation and tighter regulation, could be targeted with National Insurance applied to rental income – yet another blow for the private rental sector.
“The swirl of speculation has prompted some buyers, particularly at the top end of the market, to put purchase plans on pause. This could dampen market activity over the next couple of months if buyers wait to gain see what they are contending with before they commit.”
This article is taken from Landlord Today