"While August is expected to remain a quiet month for the housing and mortgage markets, the groundwork is being laid for a much busier period ahead. "
Historically, August has always been one of the quieter months for the housing and mortgage markets in the UK. With the summer holiday season in full swing and parents across the country juggling work and childcare commitments, it's no surprise that the volume of transactions typically slows down. However, this year, while August is expected to maintain its subdued activity levels, there are strong indications that the market is gearing up for a far busier end to Q3 and beyond.
One of the most significant developments is the recent base rate reduction. The Bank of England's decision to lower the base rate from 5.25% to 5% marked the first cut in over four years. The last time the base rate was reduced was in March 2020, when it fell to a historic low of 0.1%. The rate has since climbed steadily, reaching a 16-year high of 5.25% in August 2023 after 14 consecutive increases, before being held at that level and finally reduced.
The anticipation leading up to this rate cut has already had a noticeable impact on the UK's residential property sector. According to the latest Royal Institution of Chartered Surveyors (RICS) survey, there was a slight brightening in the market in July. In terms of buyer activity, July saw a modest uptick in new buyer enquiries, with a net balance of +2%, up from -6% in June. Although this figure was still relatively flat, it represents the first time in four months that the numbers have been positive, indicating that more buyers are beginning to enter the market. This is a promising sign, as increased buyer activity is often a precursor to a more active market overall.
Sales figures also showed signs of improvement. While the net balance of agreed sales in July was still in negative territory at -2%, this was a clear improvement from the previous months, continuing the positive trajectory seen in May and June, when the net balances were -13% and -6%, respectively. Looking ahead, there’s growing optimism in the market, with a net balance of +30% of respondents predicting sales to rise over the next three months. This is the most positive sentiment seen since January 2020. Furthermore, the 12-month outlook is even more optimistic, with +45% of respondents expecting sales to increase over the next year.
When it comes to house prices, the figures suggest that they were still decreasing at the UK-wide level in July, with a net balance of -19%. All regions in England exhibited negative sentiment towards prices, with East Anglia and Yorkshire & the Humber showing the weakest readings. However, it's worth noting that Scotland and Northern Ireland bucked the trend, with prices rising in these regions. Looking forward, a net balance of +46% of respondents expect prices to be higher in a year's time, reflecting a far more encouraging long-term view.
The UK Government's recent housing reform announcements, including planning reforms and the reintroduction of mandatory housing targets, have also added to this cautious optimism. The statement made by Angela Rayner MP on "Building the homes we need" highlighted the need for stability in social housing rent policy and set the stage for the publication of a long-term housing strategy.
Finally, competition among mortgage lenders has intensified, with several major players cutting rates to breach the 4% mark, a significant figure which is likely to attract more buyers into the market.
In summary, while August is expected to remain a quiet month for the housing and mortgage markets, the groundwork is being laid for a much busier period ahead. With the election uncertainties behind us and mortgage rates on a downward trend, we anticipate a stronger recovery in market activity as we head into September and beyond. Rest assured, we here at Countrywide Surveying Services are ready for that recovery and in the meantime, enjoy the rest of the Summer holidays!
