Calls for housing market ‘Budget boost’ as official data reveals summer setback

The government has been urged to ‘stimulate’ the housing market in its Budget, after official data showed a slight dip in house prices in July.

Housing market experts have said there needs to be more incentives to buy, and that Keir Starmer’s administration should press ahead with its new-build construction targets. While some details of Chancellor Rachel Reeves’s October fiscal speech appear to have been revealed, there are still several unknowns. For example, no clarity has been given on stamp duty.

It comes as Land Registry data showed UK house prices fell 0.4% month-on-month in July, once seasonal effects were taken into account. However, prices continued to grow annually, with the Office for National Statistics (ONS) showing they were 2.2% (£6,200) higher on average than they were in July 2023. This rate of growth was marginally down compared to what the ONS recorded in June.

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Other house price indices (HPIs) have shown there were small blips this summer. For example, Nationwide found average prices dipped 0.2% in August compared to the previous month. You can see how house prices are changing in your area with the ONS’s house prices tool.

Northern parts of UK continue to see housing market accelerate

Although the UK-wide picture for house prices showed there had been moderate year-on-year growth in prices, with a small monthly decline, the picture varied in different parts of the country. While London continued to slide back, with prices falling 0.4% against the year and 0.3% compared to June, Scotland saw them soar.

North of the border, the average property sold for £199,398 in July, which was 3.1% up month-on-month and 6% higher than July 2023. This rise came from a significantly lower base than the UK average (£289,723) and the typical price you’d find in London (£520,747).

Elsewhere, the north-south divide continued to be seen. While house prices in the North East (+3.8%) and North West (+2.8%) saw healthy yearly growth, properties in the South East (+0.5%) and South West (+1%) remained relatively static.

Other than Scotland, the only other nations and regions to see a monthly increase in prices of 1% or more were the East Midlands (+1.3%) and Wales (+1.1%). Northern Ireland’s property market, which is calculated on a quarterly basis, was 6.4% more expensive year-on-year.

The official data suggested housing market activity was evenly spread across the various different rungs of the housing ladder. Detached homes, which tend to form the top-end of the market, grew 2.3% year-on-year to an average price of £443,180. There have been reports that suggest this figure could rise in future ONS releases, as owners of high-end homes are said to be selling up in advance of possible Budget tax hikes.

Mid-market semi-detached homes saw yearly growth of 2.6% to an average price of £281,907. Meanwhile, smaller terraced houses (+2.3%) and flats (+1.4%) also remained in positive territory.

Housing market ‘resilient’ but needs Budget boost, experts say

Reacting to the latest findings, head of sales at estate agents Chestertons, Matt Thompson, put the official data’s house prices blip down to a combination of a typical summer market, and uncertainty over interest rates.

He said: “At the beginning of the summer season, many aspiring homeowners postponed their search until after their holidays. This year, this quieter period coincided with the scheduled announcement of the Bank of England, which contributed to a dip in enquiries in July. Since then, however, more house hunters have resumed their search amid lower interest rates and the availability of more attractive mortgage products.”

CEO of the Guild of Property Professionals, Iain McKenzie said the “sense of stability” in the data was good news for sellers. But he also warned that affordability concerns and a shortage of housing in some areas of the UK was presenting an “obstacle” for potential buyers.

He called for Rachel Reeves to take action that would unlock growth in the market. “It still looks likely that house prices will remain stable for the rest of the year, though it won’t be until the Budget that we get an idea of how they will shape up for 2025,” he said.

“We would like to see some incentives to buy in the Budget. Alternatively, a clear strategy for building new homes and spelling out what they are going to do to support young first-time buyers struggling to save for a deposit. The property industry is at a crossroads and the next few months will be critical. If government decision-making is strategic and practical, any signs of volatility would be appeased.”

One of Labour’s key policy announcements during its general election campaign was the Freedom to Buy scheme. However, it did not mention its extension of the existing mortgage guarantee scheme in the King’s Speech, throwing the policy into doubt.

McKenzie was echoed by mortgage expert Gareth Lewis, who urged the government to give the property market a boost. The managing director of specialist lender MT Finance said: “People are waiting and seeing what the Budget has in store, mindful of some of the pledges Labour have made. However, the government should be mindful that it still needs the property market to be functioning and ultimately that comes from more stock and more transactions. Some stimulation is essential to encourage more people to move."

One potential block to further growth could be tax rises, according to Nicky Stevenson, managing director at national estate agent group Fine & Country. She said: “Potential tax rises [are] being discussed as a means to manage public finances. If introduced, these could affect consumer spending power.”

Stevenson added that static inflation and mortgage rate cuts could still lead to a “positive shift” as we head towards 2025, and beyond.

Is now a good time to sell?

Sellers have been faced with a buyer’s market for much of the past two years. But with cost of living pressures subsiding and mortgage rates tumbling, is that situation changing?

Amy Reynolds, head of sales at estate agents Antony Roberts, suggested buyers still hold significant sway over pricing. She said: “Most properties are getting a good number of viewings but pricing is very important. Well-priced properties sell, everything else sits on the market, goes stale and ultimately will achieve less than it could have realised if the price had been more realistic in the first place.

“This isn’t a market where buyers are coming in with big offers, there are some exceptions to this but most people want to see properties that are reasonably priced and not waste their time. In a rising market, you can ask a high price and know applicants will view and offer but a flat market is very different.”

Rightmove, which found market activity was on the up in its latest HPI, also suggested that it remains a challenging environment in which to sell. Its leading expert Tim Bannister said: “Homeowners who are thinking of coming to market soon shouldn’t let the increased activity make them over-optimistic and must price competitively to sell. With affordability still very stretched for many, choosy buyers are taking their time to browse the increased number of homes for sale and find the perfect home at the right price.”