Spring boosts UK housing market: Cautious optimism prevails

As spring blossoms across the UK, there's a palpable sense of cautious optimism permeating the housing market.

As spring blossoms across the UK, there’s a palpable sense of cautious optimism permeating the housing market. This is according to Nicky Stevenson, Managing Director of Fine & Country, who adds that with inflation cooling and demand on the rise, the stage is set for a promising season ahead.

Inflation eases, interest rate cuts on the horizon

Recent data from the Office for National Statistics (ONS) reveals that CPI inflation rose by 3.4% in the 12 months to February 2024, marking its lowest level in over two and a half years. As inflation nears its target and the UK takes its first steps out of recession, 61% of economists surveyed by City A.M anticipate the Bank of England to start cutting interest rates in June.  Just under half of the economists expected the bank would cut rates three times in 2024, with some placing more optimistic predictions of four or five cuts.

Commenting on the inflation and interest rate scenario, Stevenson says, “The easing inflation and the expected interest rate cuts are positive indicators for the housing market. Lower interest rates could stimulate more buyer activity and further bolster the momentum we’re currently witnessing.”

Property prices

According to Rightmove, the average property asking price rose by 1.5% to £368,118. This uptick surpasses the average historic March increase of 1.0% and marks the most significant monthly rise in prices in ten months. Prices remain £4,776 below the May 2023 peak, and buyers are seeing a window of opportunity to buy, which alongside pent-up demand and the usual spring optimism is driving the market. Zoopla’s data shows the average discount from asking price to agreed purchase price has fallen from 4.5% last November to 3.9% in March 2024, the lowest level since July 2023, an encouraging sign of increasing buyer interest.

Robust demand and sales activity

RICS Residential Market Survey indicates a sustained positive trend in new buyer enquiries for the second consecutive month, with a net balance of +6%. A Dataloft Poll of Subscribers highlights that 59% of agents expect the traditional spring bounce in the sales market, with an additional 22% anticipating even stronger levels due to pent-up demand.

“Mortgage approvals surged by 7.7% month-on-month, reaching 60,383 in February, the highest since September 2022 and 40% above the same month last year. Meanwhile, new sales agreed are up by 9%, and there’s a 20% increase in homes for sale compared to the same period last year, increasing buyer choice,” Stevenson comments.

Prime property market shows resilience

In the prime property market, the average price stands at £1,260,008, showing a slight year-on-year decline of -1.5%. However, regions like the East Midlands, Yorkshire & The Humber, and the North West are witnessing positive annual growth.

Stevenson notes that the number of agreed sales in the top-of-the-ladder homes, typically less exposed to mortgage rates, is 18% higher than last year, compared to a 13% increase for the wider market. Zoopla data indicates that buyer demand for prime properties is also 12% higher than the same period last year, versus 8% for all properties. 

Gaining momentum

HMRC reports a notable uptick in sales activity, with 82,940 sales in February, marking the highest since September 2023. This 1.2% monthly increase signals a gathering momentum, setting the stage for activity levels to return to stable pre-pandemic norms.

Stevenson adds, “The increased buyer choice, particularly in more affordable regions like Yorkshire and The Humber, coupled with the resurgence in prime property sales, paints a promising picture for the UK housing market’s overall health and vitality.”