Bank Rate cuts boost optimism for 2025 despite Budget pause
The UK housing market has experienced some turbulence over the past month, with new seller asking prices dropping by 1.4% (equivalent to a £5,366 reduction) to an average of £366,592. This decline is larger than the usual seasonal dip of 0.8% typically seen at this time of year, suggesting that recent economic events are having a more pronounced effect on the market.
However, despite the drop in asking prices, the overall market activity remains stronger than it was at this time in 2023. The combination of pre- and post-Budget uncertainty, along with Bank of England (BoE) rate cuts, has had an interesting and somewhat mixed impact on buyer demand. While we are still seeing signs of market fatigue, particularly as we head into the winter months, there is optimism for 2025. Here's a closer look at the current state of the housing market and what to expect moving forward.
The recent Autumn Budget introduced several changes, including an increase in stamp duty charges for second-home buyers and some first-time buyers. In the immediate aftermath of the budget, the housing market experienced a slight slowdown, with fewer buyers contacting estate agents and new sellers taking a more cautious approach.
However, the mood quickly shifted with a second bank rate cut, which appears to have given a temporary boost to buyer demand. Real-time data from Rightmove shows that in early October, buyer demand was 23% higher than the same period in 2023. After the budget, this dropped to +18%, but following the bank rate cut, it ticked back up to +23%. While this suggests that there is still considerable interest in the market, we are likely to see the usual seasonal slowdown in activity as we approach Christmas.
Despite the slight price dip and temporary slowdown in buyer activity, the housing market remains in a better position than last year. The number of sales being agreed is currently 26% higher than it was at the same time in 2023. This indicates that, while the market may be experiencing a temporary pause due to economic uncertainty, it remains more robust than the quieter market of 2023.
In addition, the number of new sellers entering the market is up by 6% compared to the same period last year, showing that more people are still choosing to move, despite the challenges. This is a positive sign that the housing market is holding steady and reflects a certain level of confidence from home sellers.
Looking ahead to 2025, Rightmove is forecasting a 4% increase in average new seller asking prices. This is the highest price growth prediction since 2021 and reflects the expectation that lower mortgage rates will lead to improved affordability for buyers. With pent-up demand set to be released as mortgage rates fall, there is potential for upward pressure on prices next year.
However, it’s important to note that the market will remain highly price-sensitive. Seller competition is at its highest level for a decade, meaning that those looking to sell will need to price their homes carefully to attract buyers. Homes that are well presented and competitively priced are likely to be the most successful in securing offers.
While bank rate cuts are expected to continue into 2025, they are now forecast to be slower-paced than originally anticipated. This slower reduction in borrowing costs could delay the improvements in affordability that many potential home movers have been waiting for. The impact of these slower cuts could be particularly noticeable for first-time buyers or those looking to trade up to larger properties, who are still feeling the pinch of higher monthly mortgage payments.
However, as mortgage rates continue to fall, it’s likely that affordability will improve gradually, giving more buyers the confidence to move. This should also lead to an uptick in the number of completed sales, particularly around March 2025, when many buyers will be keen to complete their transactions before the Stamp Duty holiday expires.
One of the key takeaways for sellers is the importance of getting the asking price right. With so many homes on the market at the moment, pricing is crucial to attracting the right buyer. Rightmove’s data suggests that there are currently more homes for sale per estate agent branch than at any time since 2014. This heightened competition means that sellers need to be realistic about their asking prices and avoid overpricing their homes, which could lead to a longer time on the market and eventual price reductions.
Homes that are priced too high risk being overlooked, especially as buyers have more choice and are still stretched by affordability concerns. Sellers who can present their properties well and offer value for money will have the best chance of securing a buyer, particularly in the face of continued competition from other properties.
While the housing market has faced some setbacks in recent months, the broader picture remains one of resilience and cautious optimism. The number of sales agreed and new sellers coming to market are both higher than at this time last year, suggesting that there is still strong demand, despite economic uncertainties.
Looking ahead to 2025, there is cause for optimism, with Rightmove forecasting a 4% rise in average new seller asking prices. However, sellers will need to be aware of the competitive landscape and price their homes realistically to attract buyers in an increasingly price-sensitive market. As mortgage rates continue to fall, we can expect improvements in affordability, which will likely fuel more activity in the market, particularly in the first half of the year.
The housing market remains in a state of flux, but with the right pricing strategy and an eye on broader economic trends, sellers and buyers alike will need to navigate the coming months with both caution and optimism.
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