What impact has a new government had on the premium property market?

Here are three statistics that highlight the £1 Million+ market has very much remained business as usual during July compared to the same period last year:

All of the above were also up on the six-year average for July and this is a clear indication that the election has as more often than not in the past, had no real impact on market confidence and if anything, as per normal, we have seen the typically expected bounce in the immediate time post the result.

The number of sales being agreed was almost 2.5 times higher than the number of new listings entering the market, which is a clear sign that positive sentiment has returned to the market. 

The great news as well right now is at the time of writing, the latest UK House Price Index for June 2024 has reported an annual price increase of 2.7% and monthly rise of 0.5%.

The average UK house price now stands at £287,924 and this is only £977 and 0.34% down on the peak of September 2022.

There would have been a lot of potential movers sitting on the fence during the time between the peak and now waiting for house prices and interest rates to both drop.

However, the two usually move in opposite directions with interest rates dropping meaning house prices rise and interest rates rising would result in house prices coming down. 

I thought it would be interesting to review average interest rates in August 2024 versus August 2023 to see if a buyer would be in a stronger position having bought last year or delayed to now.

Based on a purchase at £1,000,000, a 75% LTV, and a 25-year mortgage on a two-year fixed rate of 5.05%, a buyer that waited to purchase until today would find their monthly mortgage repayments 9.15% lower than if they had purchased in August 2023 at a rate of 6.32%.

However, whilst their mortgage would be £456 cheaper per month and adding up to a £5,472 saving over the course of a year, they would be worse off due to the £27,000 average property price increase based on the original £1,000,000 purchase price.

Therefore, whilst delaying the purchase would save them monthly, it would have cost them £21,528 in property price growth minus the monthly mortgage payment savings and not to forget the debt they would have paid off during the 12 month period as well.

The saying ‘Don’t wait to buy property; buy property and wait’ very much continues to ring true. 

Activity in the market and house prices have had a phenomenal bounceback following the difficulties towards the end of 2022 and throughout 2023. 

It is also worth noting just how resilient the UK property market has been during these challenging times over the past couple of years as we experienced fourteen base rate rises in a row, reaching its highest point for over fifteen years, plus inflation hitting double figures for the first time in forty-one years.

Mortgage approvals and property transactions are moving in the right direction, having been the case for several months, and should continue to do so now that the Monetary Policy Committee voted to reduce the base rate from 5.25% to 5% for the first time in over four years on 1st August with markets pricing in one further rate cut in 2024. 

If forecasts are correct, this could mean the base rate will fall to 4.75% by the end of 2024.

Looking further ahead, financial markets are forecasting the base rate will fall to around 4 per cent by the end of next year before eventually settling at around 3.5 per cent in 2027.

Some economists are slightly more optimistic with Capital Economics predicting the base rate will fall to 3% by the end of next year. 

However, this does not mean that buyers should now sit and wait for further interest rate drops, because as we saw in the example above, waiting can cost you in the long run.

The image below highlights that the largest lender in the UK does not think we are that far off the new normal for mortgage rates and I would argue, now is a great time to get moving before increased competition enters the market and drives house prices up further.

As mentioned in my previous article, now is a great time to update your market on how positive things are looking and if they are considering a move in the near future or want to know what impact this has had on the value and the saleability of their home to get in touch with you.

This can be achieved via direct mail, social media, video, blogs, email, SMS, and WhatsApp as a few examples to get you started.

I will leave you with this final thought:

Be the agent that generates demand by talking up the market and observe the positive impact this has on your business. 

As always, thank you for reading and please do let me know if you have any questions.