Zoopla: UK property sales hit four-year high but will Budget dampen demand?

Rising wages and falling mortgage rates have helped push property market sales activity to a four-year high, Zoopla data suggests.

The latest Zoopla House Price Index for October shows the property market appears to be benefiting from lower inflation and cuts in mortgage pricing since interest rates were reduced by the Bank of England in August.

Borrowers have been able to access best-buy mortgage rates below 4% in some cases over recent weeks and this appears to have transferred into sales.

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Data from Zoopla shows the pipeline of sales agreed working through to completion is now at the largest for four years and 30% higher annually.

Buyer demand is up 22% annually, while new supply and stock are up 13% and 11% respectively, suggesting both buyers and sellers are more confident about making a move.

Sales growth is being driven by a combination of first-time buyers and existing homeowners who have delayed moving decisions until borrowing costs fell and the outlook improved, Zoopla said.

First-time buyers are set to be the biggest buyer cohort in 2024, accounting for 36% of all sales followed by existing homeowners at 31%, cash buyers at 27% and landlords buying with a mortgage at 7%, the property website says.

The Budget could change the mood this week though, particularly if chancellor Rachel Reeves unveils tax hikes and confirms that stamp duty thresholds will be reduced.

What is happening with house prices?

Confidence in the sales market hasn’t necessarily translated to house price growth though, Zoopla says.

The property website suggests house price inflation is being held back by a large choice of homes for sale and affordability pressures which are keeping buying power in check.

Average house prices are up by just 1% annually as of October to £267,500, Zoopla said, compared with a 0.9% decline this time last year.

In more affordable areas, house prices are rising at an above-average rate annually, up 2% in the North East and Yorkshire and by 2.3% in the North West.

But house prices are down slightly in East England by 0.3%, Zoopla said, and by 0.1% in the South East.

Is now a good time to buy a property?

The property market looks vastly different to the start of the year when many expected house price declines and sales to stall amid sticky inflation and high mortgage rates.

But both inflation and mortgage pricing have fallen, boosting buyer budgets.

That may make it a good time to buy a property, especially with more homes coming onto the market.

Matt Thompson, head of sales at Chestertons, says: “The property market has been extremely active this year and we currently have 17% more properties under offer than in 2020.

“Pent-up demand, improved mortgage deals and people’s desire to find a property ahead of the Autumn Budget have been key motivators for house hunters to finalise their search.”

But borrowing costs are still higher than in recent years.

Buyers could also face higher costs if the chancellor confirms that stamp duty thresholds will be reduced, as previously planned, in April 2025.

Reeves has signalled that stamp duty relief for first-time buyers will be returned from £425,000 to £300,000, while the threshold for all buyers will drop back to £125,000 from £250,000.

Currently, Zoopla estimates that 80% of first-time buyers pay no stamp duty, with 14% paying a partial amount.

Returning to previous thresholds would be more keenly felt in southern England where the average first-time buyer in London and the South East would pay £5,600 and £1,390 respectively, compared to nothing today, Zoopla said.

Richard Donnell, executive director at Zoopla, added: “First-time buyer numbers have recovered as mortgage rates have fallen but a sizeable deposit is still required to buy. Possible changes to stamp duty relief will only create further barriers to ownership for this group who already face significant affordability constraints.”