In August, the average price of newly listed UK homes fell by over £5,000, reflecting a seasonal trend linked to the school summer holidays. Property platform Rightmove reported that the typical asking price dropped by 1.5%, which amounts to £5,705, bringing the new average to £367,785. This decline is a common pattern observed during this time of year.
The drop in home prices during August is consistent with historical trends. For the past 18 years, there has been a monthly decline in house prices from July to August. This year’s decrease is in line with the long-term average, indicating that the seasonal slowdown is a recurring factor in the housing market.
The reduction in prices can be largely attributed to the annual drop in market activity that occurs during the school summer holidays. Many potential buyers pause their home searches during this period, which leads to a decrease in the number of active buyers in the market.
As a result of the decreased buyer activity, sellers who choose to list their homes during the summer often adjust their prices more competitively. This strategy helps to attract the smaller pool of buyers available during this slower period, leading to the observed drop in average asking prices.
The seasonal dip in home prices serves as a reminder of the impact of market cycles and seasonal trends on property values. Sellers and buyers alike need to be aware of these patterns when navigating the housing market, especially during periods of reduced activity.
This year’s housing market is experiencing a notable shift, largely influenced by a recent development. The Bank of England’s decision to cut its base rate for the first time in four years, effective from the start of August, has introduced a new dynamic. The rate was reduced from a 16-year high of 5.25% to 5%. This change has had a marked impact on buyer activity, with estate agents reporting a 19% increase in inquiries from potential buyers compared to the same period last year. This uptick is significantly higher than the 11% rise observed in July, indicating a growing interest in the property market.
This surge in buyer interest is a direct response to the lower borrowing costs resulting from the rate cut. As a result, there has been a noticeable increase in market engagement, with more buyers actively seeking new properties. The shift in buyer behaviour is helping to counteract the traditionally slower period seen during the summer months, when market activity tends to dip due to holidays and other seasonal factors.
In response to this change, Rightmove has updated its 2024 market forecast. Initially, the platform had anticipated a 1% decline in average asking prices. However, given the recent surge in buyer interest, Rightmove now expects a 1% increase in average asking prices for the year. This revised forecast reflects the renewed optimism in the market and the potential for price growth driven by the increased demand from buyers.
The Bank of England’s rate cut has thus provided a boost to the housing market, demonstrating how monetary policy changes can influence market trends. As buyers respond to the more favourable borrowing conditions, the property market is seeing adjustments in both buyer activity and price expectations.
Tim Bannister, Rightmove’s Director of Property Science, commented on the impact of the Bank of England’s first rate cut since 2020, stating that it has led to a noticeable increase in buyer activity as summer draws to a close. Although mortgage rates have not yet dropped significantly, the long-awaited cut and the trend towards lower rates have improved homebuyer confidence.
For first-time buyers outside of inner London, the average asking price is currently £227,191. Those looking to move up the property ladder are facing an average asking price of £340,605. At the higher end of the market, average asking prices reach £665,492.
In London, property prices remain the highest in the UK, with Kensington and Chelsea leading the market.
The current market shows strong momentum, with sales agreements 16% higher compared to the period of peak mortgage rates last year. Additionally, new sellers entering the market have increased by 5% year-on-year, reflecting a rise in homeowner confidence.
Mortgage rates have improved, though only slightly. The average five-year fixed mortgage rate has decreased to 4.80%, down from 5.82% a year ago. For buyers with a 40% deposit, the best five-year fixed rate now stands at 3.83%, the lowest since before the mini-budget of September 2022.
Despite mortgage rates still being high compared to historical levels, there is growing optimism among buyers and sellers. Tim Bannister noted that with the end of the summer holiday season, the market is set for a busier autumn. He pointed out that while further cuts to the Bank rate are needed for more significant drops in mortgage rates, the current market conditions offer a more positive outlook for the rest of the year.
Download NOW
4 Simple Steps To Becoming Wealthy Through Property