UK & London sales market update Autumn 2024

Activity picked up during the late summer and Autumn after August’s rate cut, and more rate cuts next year will underpin this trend. Buyers will be keen to beat the next stamp duty change in April next year, so vendors will be at an advantage if they bring their home to market sooner rather than later.

Highlights

• Prime London prices were broadly flat in Q3, rising by just 0.4%
• House price growth momentum slowed slightly in September across the UK, with values up 2.4% year on year
• Transaction levels continue to rise as stock levels climb

Prime London sales market

Many of the moves in the Chancellor’s Budget had been well-trailed in the press in the run-up to 30 October. But one aspect which was a surprise was the additional stamp duty surcharge for those buying additional homes – either second homes or buy-to-let properties. As the Chancellor said that this surcharge would rise to 5% from 3%, agents and conveyancers started working to get the exchange over the line before 31 October deadline, when the additional surcharge would be applied.  

From April 2025, these rates will rise again, as the basic rate of stamp duty will be re-introduced, after being scrapped during the Budget in 2022. This will mean that stamp duty will be payable at 2% between £125,000 and £250,000 for homemovers. First-time buyers will also be liable to pay stamp duty on purchases over £300,000, down from £425,000.

This move is likely to bring forward more transactions to December and the early months of next year as buyers seek to beat the cut-off. The Treasury has calculated that the rise in the surcharge will raise £115 million in the next five months and raise a further £90 million in the 12 months after that.  

The additional stamp duty may dampen demand among investors and those looking for a pied-a-terre in the capital beyond April next year, although there are some balancing factors. The first is that capital gains tax (CGT) for property sales was not changed in the Budget. This has been mooted as such as move could raise serious quantities of tax, but in the end, the Chancellor raised CGT for other assets to 18% and 24%, to match the tax payable on property. The lack of any change in this tax was good news for investors. The second factor balancing the higher stamp duty charges is the outlook for progressively lower interest rates over the course of the next year. As examined in the economic overview, the rate of interest rate declines may be slower the anticipated pre-Budget, but there are still forecast to be five more quarter-point cuts. In addition to these factors – London remains a key hub for those wanting to invest and live, with unrivalled amenities and its status as a key global economic centre.

Average capital values in the across the whole prime London market are broadly flat on the year, up just 0.4% compared to September 2023. However, this marks an improvement compared to the last 15 months when prices have been falling year-on-year. However, in prime central London, values are still down 1.1% on the year.

Further out from the central prime market, there is evidence of price growth, especially in the West and North & East, which includes the Islington market.

UK sales market

Average UK house rose by 0.1% in October, and registered annual growth of 2.4%, down from 3.2% in September. Activity continued to rise, with mortgage approvals hitting the highest level since 2022 in  September, and transaction levels are expected to rise again next year amid higher wage growth and improved affordability as mortgage rates decline. There may be more activity brought forward to the first three months of next year as buyers look to take advantage of the current rates of stamp duty.

From April next year, the stamp duty threshold for paying stamp duty will fall from £250,000 to £125,000 for home movers, and from £450,000 to £300,000 for first-time buyers.

UK house price growth is set to slightly outperform our current forecast of 1% growth this year, but our forecast for 2025 remains at +4%.

While the Yorkshire & the Humber is recording annual price growth of 3.8%, and the North West average home prices registering 4.1% increases, average values are still falling on an annual basis in much of Southern England. The exception is Greater London, where prices are up 1.6%. London experienced a more muted rise in prices during the pandemic, and a smaller reversal last year, giving it a platform for a stronger price recovery in current market conditions.