Home buyer demand in the UK has shown signs of weakening for the third consecutive month, with sales activity also subdued, reflecting mounting caution in the market ahead of the upcoming November Budget. According to the latest survey from the Royal Institution of Chartered Surveyors (Rics), a net balance of 19% of property professionals reported a decline in new buyer inquiries in September. This continuing trend of diminishing demand was accompanied by a net balance of 16% of firms seeing fewer agreed sales, marking a softer but still downward movement compared to August's figure.

The Rics report highlights that concerns linked to the November Budget are weighing heavily on both buyers and sellers, who face affordability challenges and a cautious market sentiment. The anticipated government measures and potential tax revisions have contributed to a growing hesitancy. Rics also points to regional disparities, with the South East of England and East Anglia experiencing some of the steepest falls in house prices, while Scotland and Northern Ireland continue to register modest price gains. Despite the ongoing short-term caution, surveyors remain optimistic about house prices in the longer term, expecting overall increases over the next 12 months.

Alongside demand softening, the supply of properties is cooling, with a net balance of 15% of professionals observing a fall in new seller instructions for the second month running. This declining supply has been echoed in the rental market, where tenant demand remains broadly flat but landlord instructions have fallen sharply, with 38% of property professionals noting a reduction. Rents are projected to rise by approximately 3% over the coming year. Sarah Coles, head of personal finance at Hargreaves Lansdown, remarked to The Irish News that the shrinking number of landlords is intensifying competition for rental properties, pushing rents higher and increasing uncertainty for renters who may face frequent relocations.

The government has recently unveiled plans to overhaul the home-buying system to make it more efficient and reduce costs for buyers. These reforms could include mandating property sellers and estate agents to provide more comprehensive information upfront, thus limiting the need for lengthy searches and surveys typically conducted by buyers. Furthermore, the introduction of binding contracts earlier in the process aims to mitigate the risk of transaction chain collapses, potentially shortening the time it takes to complete purchases by weeks. The model draws from systems in Scotland, where upfront information and earlier binding agreements are standard. According to Reuters, these measures could cut typical first-time buyer costs by around £710 and receive backing from industry bodies like Rics.

Market data from Zoopla and Halifax paint a nuanced picture of house price trends amid this subdued demand and supply scenario. Zoopla’s research indicates that the average price for a first-time buyer home reached £229,000, reflecting a 2.4% increase year-on-year, outperforming the overall average house price rise of 1.3%. Price growth is notably strong in the North East, climbing over 10%, while London bucks the trend with a 2.4% price decline for first-time buyer homes, where entry costs average £420,600. Regional affordability contrasts markedly, with first-time buyers outside London primarily targeting three-bedroom houses, whereas Londoners focus mainly on one- and two-bedroom flats.

Meanwhile, Halifax reports the slowest annual house price increase since April 2024, at just 1.3%, with a slight monthly price decline of 0.3% in September defying some economist expectations. This slowdown is partly attributed to ongoing economic uncertainty, concerns about potential property tax hikes, and high borrowing costs. The autumn Budget slated for November, overseen by Finance Minister Rachel Reeves, stirs further market unease due to prospective tax changes. Northern Ireland continues to buck the softer trend with annual price growth of 6.5%, contrasting with modest gains in London. Housing market commentators and analysts emphasize a mixed regional outlook, reflecting underlying economic and fiscal variations.

Despite subdued demand, some experts suggest conditions may be relatively favourable for certain buyers. Mortgage rates, which had surged in prior months, have started to ease—average rates hover around 5%, with some sub-4% deals re-emerging following cuts from the Bank of England. This easing, coupled with a growing stock of homes, particularly in southern England, may provide better affordability and choice for buyers than recent periods. Nevertheless, elevated inflation at 3.8% continues to limit further rapid interest rate reductions. Prospective buyers are advised to assess their financial security carefully before entering the market, considering the possibility of further tax and policy shifts.

In conclusion, the UK housing market is currently characterised by cautious buyer sentiment, moderated sales, and a tentative supply environment, underscored by concerns over upcoming fiscal policies and affordability constraints. Government reforms to streamline and reduce costs in the home-buying process may provide some relief, but near-term momentum appears weak. Regional variations remain significant, with the strongest growth witnessed in parts of Northern Ireland and the North East of England, while London and the South East face sharper challenges. The long-term outlook retains cautious optimism, contingent on economic stability and the impact of forthcoming government measures.

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Source: Noah Wire Services