As you know, at Homesite, we like to keep you up to date with all the latest developments in the property market and the current political and economic upheavals mean there has been a great deal of speculation over what is going to happen to it over the next 12 months. Many are expecting the heat to come out of demand and prices to fall, especially with the base rate rising once again last month. However, it is not as straightforward as it may appear, as there are a number of factors at work which need to be taken into account before it is possible to get a true understanding of what is actually going on.

The latest data from Rightmove’s index shows, for example, that far from falling asking prices were up again in October, by 0.9% nationally and by an impressive 1.9% in London. At the same time, Rightmove notes that demand softened, but not by much and is still 20% ahead of pre-Covid levels (2019). The data also shows no evidence of a surge in the number of sales falling through – just 3.1% of agreed deals compared to a long-term average of 3.0%. Nor were vendors making significant reductions to their asking prices – 23% of listings had their prices reduced compared to a more typical 32%.
These are the kind of statistics that you would normally expect from a healthy market, however, when you dig a little deeper, it seems that some of that momentum is being driven by buyers who have had mortgages agreed before rates rose and are therefore rushing to push through deals in order not to lose them. When those buyers complete their deals (and there are 293,000 of them, according to Zoopla) there may be a more pronounced slowdown, but that is not likely to happen until the first quarter of 2023.

And that slowdown is unlikely to be anywhere near as serious as some of the more lurid recent headlines have suggested. That is because prices will continue to be supported both by the shortage of property and the current historically high levels of employment. Perhaps more significantly, prices will also be supported by the improving outlook for mortgage costs. Although the base rate went up by 0.75% last month, mortgage rates actually fell. That’s because prices are affected as much by the outlook for interest rates as the current base rate (see this month’s financial section). And the outlook for the UK’s inflation, and therefore the base rate, has been adjusted down in recent weeks, with many experts now predicting mortgages have already peaked at 6.5% and are likely to start falling back over the next 12 months, dropping to somewhere between 4% and 5% towards the end of 2023.

These are, though, challenging times and the economic outlook could still change rapidly, especially, for example, if inflation dropped faster than expected, which would be good news, or if there was a significant wave of redundancies, which would not be such good news. In the meantime, the housing market is, and is likely to continue to be, remarkably resilient.
Tim Bannister, Rightmove’s Director of Property Science says:

“What’s going to happen to house prices is understandably on the minds of many home-movers right now, especially following the market uncertainty after the government’s mini-budget. There has been no immediate effect on prices, but the trend of a slight softening in the pace of growth continues. New sellers coming to market in the month have been pricing strongly, and the number of homes that were already on the market seeing a reduction in price is still well below the long-term average. It will take a bit of time for the market to settle in to a new, more ‘normal’ level of activity following over two years of market frenzy, especially with new developments happening almost daily at the moment.”

And finally, the Autumn Statement was not as bad for the housing as many feared. Liz Truss’ Stamp Duty will be reversed, but not until April 2025, turning it into a Stamp Duty holiday rather than a long-term commitment. It means the threshold will go back to £125,000 from £250,000 and the first-time buyer exemption will be reduced to £300,000 from £425,000 and be limited to properties of up to £500,000. The restricted timescale might at least put some urgency into the sales market, just as it is starting to slow.

Changes in Capital Gains Tax are another area where there are implications for housing, especially landlords and second-home owners. The annual exemption they would receive when they sell a property will be reduced from £12,300 to £6,000 from April 2023 and to £3,000 in April 2024. Inflationary pressure and the social care crisis have also meant the Chancellor will allow councils to raise council tax by as much as 5%, up from a limit of 2.0% previously. At the same time, Hunt capped social rent rises to a below inflation 7%.


Rightmove’s index was up last month, but Nationwide’s and Halifax’s were down, although their annual figures were up by 7.2% and 8.3%, respectively.
Nationwide: Oct: Avge. price £268,282. Monthly change -0.9%. Annual change +7.2%
Halifax: Oct. Avge. price £292,598. Monthly change -0.4%. Annual change +8.3%
Land Registry: Aug: Avge. price £295,903. Monthly change +0.9%. Annual change +13.6%
Zoopla: Sept: Avge. price £259,100. Annual change +8.1%
Rightmove: Oct: Avge. price £371,158. Monthly change +0.9%. Annual change +7.8% (asking prices on Rightmove)