UK house prices rose more strongly than expected in September, defying predictions of only modest growth and highlighting the continued resilience of the property market. However, economists have cautioned that the outlook remains uncertain, particularly with the Chancellor’s Budget fast approaching.
The latest data from the Nationwide house price index revealed that the average home increased in value by 0.5% between August and September. Prices climbed from £271,079 to £271,995, outperforming forecasts and suggesting that demand has not completely cooled despite broader economic pressures.
This rise was notable given the context of August’s performance, where prices had unexpectedly dipped by 0.1%. Analysts had anticipated only a small rebound of 0.2%, but the housing market delivered more momentum than expected, surprising many observers.
Looking at the bigger picture, annual growth also showed steady improvement. House prices were 2.2% higher compared with the same month last year, up from the 2.1% recorded in August. This was also ahead of the 1.8% annual growth initially predicted by forecasters.
While the increase provides some reassurance for homeowners and sellers, experts warn that the second half of the year may not deliver the same strength. The looming Budget, combined with persistent cost-of-living challenges and high borrowing costs, is expected to weigh heavily on buyer sentiment.
Elliott Jordan-Doak of Pantheon Macroeconomics noted that Chancellor Rachel Reeves may see property as an attractive area for revenue-raising measures. With a reported £30 billion gap in public finances, changes to housing-related taxes are widely viewed as a strong possibility.
There is already speculation that capital gains tax may be adjusted, particularly on high-value homes worth more than £1.5 million. Such a move would likely affect wealthier homeowners and investors, potentially dampening appetite in the upper tiers of the market.
Jordan-Doak also warned that uncertainty surrounding the Budget could influence buyer behaviour in the short term. He suggested that many prospective purchasers may adopt a cautious, wait-and-see approach until after the Chancellor sets out her fiscal plans in late November.
Alex Kerr of Capital Economics added to the concerns, pointing out that the housing market still faces headwinds from a weak jobs market and elevated mortgage rates. He explained that these factors would make it difficult for house prices to sustain the same level of growth seen in September.
He also highlighted the risk that tax rises in the upcoming Budget could exacerbate uncertainty, discouraging potential buyers and slowing activity in the housing sector further. For many households, the dual pressure of higher borrowing costs and fiscal changes is enough to delay moving decisions.
Despite these warnings, Robert Gardner, Nationwide’s chief economist, offered a more positive assessment. He emphasised that underlying conditions for homebuyers remain broadly supportive and suggested that housing market activity could gradually strengthen in the quarters ahead, provided the wider economy continues to recover.
Housebuilder Taylor Wimpey also weighed in on the situation, acknowledging that the delay to the Budget has created some unease among customers. However, the company insisted that it remains well prepared to cope with short-term volatility in buyer confidence.
The firm’s share price rose by 0.5% on Wednesday, reflecting investor confidence in its ability to deliver. Taylor Wimpey confirmed that it is still on track to complete between 10,400 and 10,800 homes this year in the UK, despite wider uncertainty in the market.
A spokesperson for the developer added that the business already holds sufficient land, with planning permission secured, for its 2026 housing targets. This forward planning, they argued, positions the company strongly even as the broader market faces challenges.
Meanwhile, mortgage borrowers have faced fresh pressure after the Bank of England chose to keep interest rates at 4% last month. While this decision avoided an increase, it also meant no immediate relief for homeowners struggling with high repayment costs.
Andrew Bailey, Governor of the Bank of England, warned that Britain is “not out of the woods yet” when it comes to inflation. He stressed that any future interest rate cuts would be implemented carefully and gradually, to ensure stability without reigniting price pressures.
For buyers, this means mortgage rates are likely to remain relatively high in the short term. While some lenders have adjusted their products in response to market changes, borrowers still face a challenging environment compared with the ultra-low rates seen in the years before 2022.
The combination of high borrowing costs, speculation over tax rises, and global economic uncertainties has created a complex picture for the property market. Some analysts expect demand to slow as buyers weigh up affordability and the risks associated with new fiscal measures.
Others, however, believe that demand for housing will continue to hold up, particularly in areas where supply remains tight. For many would-be buyers, long-term needs such as more space, job relocation, or family requirements will continue to drive market activity despite the hurdles.
Looking ahead, much will depend on the November Budget. If Rachel Reeves does introduce significant changes to property taxation, it could alter the trajectory of the housing market into 2026. Buyers and sellers alike are waiting to see whether the Chancellor opts for reforms that increase costs or provide reassurance.
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