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Residential Market

A return of the buyer's market?
UK property purchases see a 5.5% average discount, the highest since 2018

Opportune moment for first-time buyers as London and UK rents soar by 31% & 26% respectively

David Hannah, Chairman of Cornerstone Tax – the UK’s leading property tax experts - discusses his optimistic views on the latest property news and its impact on

first-time buyers

Homebuyers in the UK are currently in the strongest negotiating position in five years, with an average discount of £18,000 off asking prices to secure a deal, according to research by Zoopla. The average discount on house purchases has reached its highest level since 2018, standing at 5.5% in the first half of November, up from 3.4% in the first half of 2023. This trend suggests a return to a buyer's market despite a long-term housing shortage in the UK. The situation is particularly pronounced in London and the south-east, where the average discount is 6.1%, equivalent to £25,000. The current housing market dynamics are attributed to factors such as increased seller realism on pricing, a six-year high in the number of homes for sale, and lower buyer demand compared to pre-pandemic levels.

While mortgage rates show signs of easing, sellers are under pressure to accept lower prices. The number of transactions has increased by 15% compared to the previous year. Overall, UK house price inflation has slowed from 8.2% to -1.2% over the past year, and separate figures from the Office for National Statistics (ONS) indicate a 0.1% drop in the average home price in the year to September, the first annual fall in more than a decade. The typical cost of a UK home is reported to be £291,000 in September.

In light of this, property expert and Group Chairman of the UK's leading property tax experts Cornerstone Tax, David Hannah, argues that even with this reported drop in houses prices, affordability issues remain in the housing market. Yet this drop comes at a time when those currently stuck in the perpetual cycle of renting, are facing record renting prices across the capital and the UK. A recent London property report from Savills, reveals that London rents have increased by 31% since 2021, now consuming 42.5% of Londoner’s income, exceeding the 30% affordability threshold.

Adobe

"First-time buyers should be especially emboldened to look towards taking their first step on the housing ladder as opportunities continue to crop up."

David Hannah, Group Chairman

This staggering data has created a toxic environment for renters who cannot bid higher for properties due to financial constraints. The challenges for London renters only increase further when the market has significant funding difficulties, as well as planning constraints which impact its growth. Currently, only 3,172 build-to-rent units have been completed in London in the current year, falling short of the Mayor of London's target of 52,000 new homes between 2021 and 2022. Research has also previously highlighted the need for 90,000 additional homes annually in London to impact housing affordability significantly. Similar trends are being seen across the UK, where rents have risen by 26% since March 2020, and a further 18.1% increase is projected by 2028. The shortage of rental homes is exacerbated by private landlords leaving the market due to factors like increased rental demand, rising debt costs, and changed tax policies. Furthermore, two in five renters believe they will need financial support from parents, with nearly 25% of Londoners aged between 25-45, contemplating leaving the capital due to affordability issues.

David Hannah, Group Chairman of Cornerstone Tax, comments:

“In the next few months we should expect to see a flurry of activity within the housing market, as mortgage lenders continue to slash their rates and house prices continue to fall across the country. First-time buyers should be especially emboldened to look towards taking their first step on the housing ladder as opportunities continue to crop up.

“I hope that we will see the BoE cut interest rates by half a basis point at their next meeting – this would catalyse activity in the housing market and allow for somewhat of a soft landing rather than a potential crash. Additionally, easing the interest rates might bolster consumer confidence, encouraging investment and spending in various other sectors, stimulating economic activity at a time when the UK most needs it.”

David Hannah, Group Chairman
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