Market Commentary – October 2024

Back to Normal

The Future Is Orange

Some housing market measures have returned to normal levels but the outlook for the market appears slightly more mixed than last month and, unfortunately, the future is orange and looks much less bright today.

Back to Normal

There are some signs the UK’s housing market is returning to normal. As mortgage rates have fallen in recent months, both house prices and activity levels have recovered from their falls over the last couple of years. For example, last month the ONS reported that average sold prices in August were 1.5% higher than their previous peak recorded in September 2022 – though it’s likely this data will be revised in coming months – and Bank of England data showed the number of mortgage approvals for house purchase in September had recovered back to its average for the 2013 to 2019 period (Fig 1). However, the recovery in completed transactions is still lagging and has been stuck at around 92,000 per month for the last six months, about 7% lower than the pre-pandemic average. Unfortunately, that pre-pandemic average is nothing to get excited about as it remains well below pre-financial crisis levels of activity and the short-lived post-pandemic boom.

Despite the return to previous price and activity levels, the short-term prospects for the market are looking slightly more mixed than they were at the time of last month’s commentary. The pipeline of potential activity still appears relatively robust which is no surprise given there have been around 300,000 fewer mortgage approvals than we might’ve expected over the last two years and prospective first-time buyers remain desperate to escape the private rented sector. This demand is reflected in robust sales agreed figures from the listings portals, with Rightmove reporting the number of sales agreed were 29% higher than a year ago – though their data was down 17% the previous year so the net figure over two years is probably closer to +7%. However, buyer demand remains incredibly interest rate dependent and there are still considerable difficulties in actually getting sales agreed to completion. The medium-term outlook for interest rates remains downwards but recent weeks have seen an increase that will feed through into higher mortgage rates and could dampen demand over the quieter Christmas period. Looking further ahead, the outlook for both activity and prices depends on where rates settle.

The Future Is Orange

It is far too early to know what the election of Donald Trump as US president will mean for the UK’s property market. What appears more certain is that his election will bring bad news for the global economy, global security, climate change, and probably anyone that isn’t a rich white male American. The prospects for the UK’s economy now look even more challenging as we sit outside the EU and are more exposed to the global fallout – with downwards pressure on economic growth, higher inflation, and more defence spending looking likely. Hopefully the future turns out brighter than it appears today but it is now clearly orange.

Market At A Glance