Momentum continues to build across the property market, with the hope of an imminent interest rate cut helping to drive buyer demand.
Nicky Stevenson, Managing Director of Fine & Country, highlights that the economic picture is beginning to brighten.
Commenting on the overall economic picture, Stevenson says: “ONS data show that Inflation fell to just 2.3% in the 12 months to April 2024, nearing its 2% target. In addition, the economy grew by 0.6% between January and March 2024, marking the end of the recession.
"With the economic outlook improving, consumer confidence in May reached its highest level since December 2021, and the base rate is widely expected to be cut soon.
"Economists at Capital Economics are forecasting the base rate to be at 4.5% by the end of 2024, with the first cut expected in August. An interest rate cut should improve buyer affordability, leading to increased activity and upward pressure on prices.”
While there are fears that the General Election could pause the market activity, Stevenson believes the first interest rate drop will likely have a much larger and more positive effect on activity this year.
She explains: “With no significant policy changes affecting the housing market, the election is unlikely to interrupt seasonal transaction cycles, which typically peak in July and August. The sales pipeline is already strong, 3% higher than at the same time last year according to Zoopla, and those who are already in the process of working to a sale are unlikely to pull out."
Pent-up demand will play a role in the next few months. Many homeowners who delayed moves in the second half of 2023 due to aspects such as concerns over higher borrowing costs have been persuaded by the relative mortgage rate stability and prospect of an interest rate reduction, to get on with their move.
Activity is steadily building with 90,430 sales in April, a 4.6% uptick from the previous month. According to HMRC, transaction levels are at their highest since March 2023 and up 9.8% year-on-year, indicating a reviving property market, with improving economic conditions easing household financial pressures.
Stevenson notes that the number of sales being agreed in the first four months of the year is 17% higher than last year, with Rightmove reporting that there is a 12% increase in the number of new sellers coming to market. Mortgage approvals, whilst steady month-on-month, are up 25.8% year-on-year according to the Bank of England.
The Nationwide HPI data indicates that UK house prices rose 0.4% month-on-month in May, while the rate of annual growth picked up to 1.3%, from 0.6% in April.
Stevenson adds: “As sellers return to the market, the number of homes for sale has reached its highest level in eight years. Zoopla reports that the average agent has 31 homes for sale, up 20% on the same time last year, giving buyers more choice and supporting the growth of sales. The increase in supply is expected to keep house price inflation in check over 2024."
Looking at the prime market, she adds that the average price of a property is £1,243,896, having moderated slightly by -2.5% year-on-year. Bucking the trend is Scotland and the East Midlands which are experiencing positive annual growth at +13.5% and +0.8% respectively.