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Real Estate Forecast: The Autumn Budget has lowered average asking prices, but property values are forecasted to surge in 2025 via Rightmove.

Property prices decreased significantly in October due to concerns about potential tax increases.

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Property market forecast predicts a short-term decrease in asking prices during the Autumn Budget,...
Property market forecast predicts a short-term decrease in asking prices during the Autumn Budget, with a recovery and price increase expected in 2025, according to Rightmove.

Real Estate Forecast: The Autumn Budget has lowered average asking prices, but property values are forecasted to surge in 2025 via Rightmove.

The property market in the United Kingdom is currently experiencing a mixed outlook, with recent interest rate cuts providing a boost, but tax rises and fiscal uncertainty casting a shadow.

Boost from Interest Rate Cuts

The Bank of England's recent decision to cut the base interest rate from 4.25% to 4% has been welcomed by many buyers, particularly those with trackers or variable rate mortgages. This cut, the fifth since August 2024, is expected to improve borrowing affordability, reducing monthly repayments by around £20–30. This renewed buyer confidence is anticipated to increase viewings, offers, and transactions in the short term, providing a much-needed boost to the residential property market ahead of the Autumn Budget in October 2025.

Stamp Duty Increase for Second Homes and Investors

During the Autumn Budget, the Chancellor announced an increase in the Stamp Duty surcharge on additional properties (second homes, buy-to-let, and investment properties) from 3% to 5%. This change, effective from October 31, 2024, is expected to increase transaction costs for investors and second-home buyers, potentially dampening demand in that segment. The government justifies this rise as a measure to support first-time buyers and domestic movers over the next five years.

Uncertainty Over Inheritance Tax

Ongoing uncertainty about potential significant changes to inheritance tax, including a possible lifetime cap on tax-free gifts, is causing both buyers and sellers to delay property transactions. Families worry about losing current tax reliefs like the residence nil-rate band, which may lead to slower market activity as decisions to move or invest in property are postponed until the tax situation clarifies after the Budget.

Anticipated Market Impact

  • Buyers with variable-rate mortgages are benefiting from lower borrowing costs, likely increasing affordability and demand in that group.
  • Increased Stamp Duty rates for additional properties could suppress investor activity and second-home purchases, reducing demand in those areas.
  • Tax uncertainty, especially around inheritance tax, is causing hesitation in market movement among families and older sellers.
  • Sellers may see increased buyer interest but must be cautious with pricing strategies, as affordability improvements compete with tax-related concerns.

The average new seller asking prices dropped by 1.4% between September and October, according to Rightmove's latest data. This drop, larger than the typical 0.8% drop for this time of year, is attributed to concerns about tax rises ahead of and after the Autumn Budget. Despite this drop, average values are still up 1.2% annually. House price growth has hit a two-year high, with prices back above their pre-pandemic peak.

Analysts have revised their forecasts for house prices due to the change in sentiment in the market. Savills, which previously predicted a 3% fall this year, has since revised its forecast to annual growth of 2.5%. Looking to 2025, Savills is forecasting a 4% rise in house prices. Rightmove's prediction of a 4% rise in asking prices next year is the highest since 2021.

Uncertainty about tax rises and changes in the property market in the build-up to the Budget appears to have slowed momentum. However, a second bank rate cut and a boost of optimism regarding 2025 appear to have reversed this trend at least temporarily. Ahead of the Budget in early October, Rightmove data shows buyer demand - based on enquiries to estate agents - was 23% ahead of the same period in 2023.

New sellers will need to continue being sensible with their price expectations to attract buyers who are spoilt for choice. As the Autumn Budget approaches, market participants are advised to monitor the announcements closely for further guidance and policy details.

[1] Bank of England Interest Rate Cut: https://www.bankofengland.co.uk/monetary-policy/interest-rates/interest-rate-announcements/2024/october [2] Autumn Budget 2024: https://www.gov.uk/government/publications/autumn-budget-2024-documents/autumn-budget-2024-documents [3] Inheritance Tax Changes: https://www.gov.uk/government/news/chancellor-to-deliver-long-term-support-for-first-time-buyers-and-domestic-movers-in-budget-2024 [4] Rightmove House Price Index October 2024: https://corporate.rightmove.co.uk/research/house-price-index/october-2024/

  1. Despite the Bank of England's interest rate cut improving affordability for buyers with trackers or variable rate mortgages, the increase in Stamp Duty rates for additional properties might hinder demand within the investor and second-home buyer segments of the real-estate market.
  2. Ongoing uncertainty over potential significant changes to inheritance tax, including a possible lifetime cap on tax-free gifts, is causing both buyers and sellers to delay property transactions in the housing-market, contributing to a slower market activity.
  3. The boost from the Bank of England's recent interest rate cut could provide a much-needed boost to the residential property market ahead of the Autumn Budget; however, potential tax rises and fiscal uncertainty could cast a shadow over investors' interests in finance and real-estate.

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