UK property market holds steady with further drop in inflation and interest rate cuts on the horizon

For the first time in three years, inflation in the UK reached the Bank of England’s target when it fell to 2% in May. Although interest rates were maintained at 5.25% by the Bank of England in June, a rate cut looks very likely to be announced in August. In welcoming news for the property market, the UK’s former chancellor, Jeremy Hunt, said the country’s inflation rate was lower than ‘nearly all’ big economies.

Will the general election impact the UK’s property market?

As most industry experts have opined, and as the history of general elections in the UK goes, the upcoming general election on July 4th will not affect the property market in a big way as it will have little effect on house prices and buyers’ plans. If data over the last 40 years covering nine General Elections is to be relied upon as a benchmark, activity in the property market has generally increased. For all General Elections except one, house prices in the UK have risen 5% over the following 12 months.

Economic factors over politics

For most homebuyers in the UK, broader economic trends hold more weight than politics, as their priorities tend to align with factors such as the job market and overall affordability. For a buyer, individual circumstances determine purchase and selling decisions, with inflation rate drops and interest rate cuts being the key influences currently.

Data from the property portal Rightmove has backed this up as it revealed that over the last four weeks, the number of agreed property sales has remained steady at 6% higher than last year. Additionally, buyer demand has also held its ground at 5% more than last year. In a survey of over 14,000 people planning to move home, 95% said the election wouldn’t impact their plans.

Our own data also reflects a similar trend, with new instructions increasing, enquiry levels rising and transactions forging ahead as planned.

Steady growth in London property market

According to Rightmove, while London properties had an overall average price of £697,607 over the last year, most of the sales in the UK capital were that of flats, which sold for an average price of £535,452.

Rightmove also reported that sale prices in London over the last year were similar to the previous year and 7% higher than the 2021 peak of £652,811.

Increase in demand for rental properties

Although the post-Covid demand and supply deficit has eased a bit, rental demand in London is still high, with around 14 applicants for every vacant property. This supply shortage is expected to continue even as numerous developments are launched and completed across the city, which is starting to ease housing stocks, but just marginally.

According to Zoopla, rents in London rose by 3.7% over the last year. Despite the rent increase, we at Benham & Reeves are seeing most rental properties get tenants quickly, resulting in better yields and minimal voids for our landlords.

Rental demand in London is also a seasonal affair and with students all set to start university in September and October, we have already begun to receive an increase in the number of enquiries from international students and new graduates moving to the city. Our guide to finding accommodation in London is helpful for students from Singapore and their parents looking to find the right place for their children.

Upcoming live seminar

The Tories and Labour will battle it out at the polls this July to take charge and form the government in the UK. To help you understand their policies better and how they will impact the decisions of overseas property buyers in the UK like yourself, we have arranged a special seminar. Our speaker, Mr. Doug Fordham is a leading residential property lawyer with over two and a half decades of experience working on the purchase of new builds and development projects in London and across the UK. Register now and join us for this exclusive seminar on Monday, 8th July at 7 pm. For more information about buying, selling and renting a property in London, contact us today!