Property expert says 'expect house price rises next month but challenges still lie ahead'

Summer is generally a quieter time in the property market - and this year has been no different. But with September fast approaching there are reasons to be more positive.

Normally, there is a meaningful uptick in buyer interest – and I don’t expect this year to be any different. There are a couple of factors that make this scenario likely for next month.

For a start, the election is done and dusted and we have a new government, big lenders are making decent mortgage rate reductions and house prices are holding steady, increasing even.

Landlords who wanted to flee have probably done so now and whilst there will be many bumps ahead, it is refreshing to have our government focusing on issues rather than self-preservation. Long may it last (Spoiler: it won’t)

The stability may mean more would-be sellers, who have sat on their hands, will be tempted into listing and making the move. But there are other factors too. First, interest rates. They’ve just dropped to five percent, the first fall since 2020 when they went from 0.25 percent to just 0.1 percent - it hardly seems possible now and all credit to anyone who took a long fixed rate back then.

Wage growth has slowed which could mean another cut before Christmas. Each cut saves buyers a few pounds a month and helps to convince savers that property could be a better place for their cash than the bank. But more important is the message it sends – buy soon or you’ll miss the boat. Each cut is surely an extra sale a month.

The second key difference next month are energy costs. Like inflation in general, the pain is easing with the price cap now around £130 a month versus £350 in January. That’s £220 a month in a buyer’s pocket – that’s about £50,000 of a mortgage paid.

The next clue is the fact rents and house prices are up already, about seven percent and 1.5 percent respectively. In the spirit of ‘glass half full’ this is significant for two reasons – it is growth and it isn’t a drop. Another key factor is the fact the election has happened and any initial fallout has dispersed.

The late October Budget which will deliver some pain, hasn’t happened yet, enjoy this interim period. As mentioned, wage growth has just slowed to a two year low. This eases inflationary worries and makes a rate cut likely but on the flip-side, potential buyers feeling less well-off won’t help much.

There is a clear divide between property that is coming on to the market freshly, at the correct price, and more stale property, perhaps because the sellers or their agents were overly optimistic about price.

The buyer’s favourite still seems to be the smaller family house or bungalow with flats appearing to struggle – a symptom of a much reduced appetite from buy-to-let investors.

With the cost of borrowing falling, as well as the reduction of returns of cash in the bank, we may see the BTL market gain some momentum in the final part of the year.

However, any recovery will be short lived, at least short term, as investors become fearful of legislation changes that look likely to happen, after many years of uncertainty.

So there are reasons to be cheerful, yes, but challenges still lie ahead.