Average asking prices dropped in the first weeks of August amid the usual summer lull but the property market is set for a busy autumn following interest rate cuts, Rightmove claims.
The housing market appears to have turned a corner in recent months as slowing inflation and falling mortgage rates boosts buyer budgets.
This has been helped by the Bank of England’s interest rate cut in August, making purchasers more confident about buying a property.
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Despite the cut, Rightmove’s latest House Price Index shows asking prices reduced, as they usually do this month, due to the summer holiday period.
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Average asking prices fell 1.5% between July and August but rose 0.8% annually to £367,785, suggesting sellers are more optimistic than a year ago.
Typical asking prices fell across all types of property between July and August, Rightmove said.
The asking price of a typical first-time buyer home was down 0.3% to £227,191, second-stepper homes fell 0.9% to £340,605, but the biggest dip was at the top of the ladder with a 2.3% fall to £665,492
The property website’s latest report found the number of potential buyers contacting estate agents about homes for sale has jumped from 11% annually in July, to 19% since the start of August.
This boost in activity has led Rightmove to raise its forecast for asking price growth to 1% for this year from a previously predicted decline of 1%.
“The first bank rate cut since 2020 has sparked a welcome late summer boost in buyer activity,” says Tim Bannister, director of property science for Rightmove.
“While mortgage rates aren’t yet substantially lower since the rate cut, the fact that the long-hoped-for first cut has finally arrived, and mortgage rates are heading downwards, is positive for home-mover sentiment. As the summer holiday season comes to an end, the conditions are there for a more active autumn market.”
The changing UK housing market
The UK housing market is pretty seasonal.
The spring is typically the most busy time, when the days are getting longer so there are more daylight hours to view a property.
The market typically quietens down over the summer when more people are going on holiday before an autumn rush when buyers and sellers look to secure a move before Christmas.
But there have been other factors at play this year including sticky inflation and high mortgage rates during the early months of 2024.
Falling inflation in recent months and the Bank of England’s August interest rate cut, followed by a decline in mortgage pricing, appears to have sparked confidence since June.
Other house price reports have shown high levels of growth when it comes to sold prices.
The Halifax HPI put the annual house price growth rate for July at 2.3%.
Rightmove’s data shows the number of sales being agreed is now 16% ahead of the near-peak-mortgage-rate period of a year ago, while the number of new sellers coming to market is 5% ahead of last year as confidence to move grows.
Nathan Emerson, chief executive of estate agency trade body Propertymark, says the housing market needs a boost after years of uncertainty.
“If inflation continue falls next month, it would be positive for the Bank of England to use this as an opportunity to cut interest rates further, especially as the recent cut in interest rates spurred some activity in the housing market,” he says.
“Additionally, now that the new UK government has had a month in power, they should implement their Planning and Infrastructure Bill to liberalise the planning system and deliver those millions of new homes the country desperately needs while protecting the greenbelt.”
Will house prices rise or fall in 2024?
Many analysts had expected house prices to fall this year due to the high cost of living.
Forecasts suggested sellers would have to drop prices to attract buyers who were deterred by high mortgage rates.
But Zoopla data suggests the level of price discounts has narrowed as inflation has slowed.
Buyers are now paying 96.8% of the asking price for a home, the highest of any point in the past 18 months.
Zoopla is predicting a 2% rise in sold prices, while others such as estate agency brand Knight Frank are more optimistic at 3%.
Affordability remains stretched but buyers may be buoyed by falling interest rates, lower energy prices and economic growth, which has prompted Rightmove to alter its own forecasts.
“The reaction from home-movers to what is hopefully only the first of several rate cuts over the next year or two, combined with other positive data and trends, has led us to raise our price prediction for the year,” adds Bannister.
“We now expect new seller prices to rise marginally by 1% over the whole of 2024. This is a relatively small revision from our original prediction of a 1% fall in prices over the year, since we didn’t initially forecast anything more drastic than a slight drop in prices this year.”
