UK Property Market Rebound: Lower Mortgage Rates Drive Sales Growth

The UK property market is seeing a significant revival in activity, spurred by the lowest mortgage rates in 15 months, according to the latest House Price Index from Zoopla. The data highlights a rebound in both buyer demand and sales, offering a promising outlook for overseas investors looking to tap into the UK market.

Key Insights from the Market

a. Sales Surge: The number of sales agreed has increased by 25% compared to a year ago, with demand surging by over 10% across all regions of the UK. The East Midlands and North-East have seen particularly strong activity, with sales up by 30%.
b. Increased Supply: A growing confidence among sellers has resulted in more homes being listed for sale. This includes both homeowners taking advantage of falling mortgage rates and investors or second-home owners looking to offload properties due to recent tax changes.
c. Chain-Free Sales: 32% of homes currently for sale on Zoopla are listed as chain-free, primarily driven by investors and second-home owners eager to sell ahead of potential further tax changes in the upcoming budget. Among these properties, 2-bedroom houses are the most common, making up 41% of chain-free listings.

The Impact of Tax Changes on Supply

The upcoming doubling of council tax for second homes in 2025 is expected to further increase the supply of properties for sale in popular second-home markets. Coastal and rural areas such as Truro (47%), Torquay (44%), and Exeter (41%) have all seen a significant boost in available supply, with some areas seeing over 40% more homes listed.

While increased supply is offering more choices to buyers, it is also keeping house price growth in check in these regions, with annual price growth remaining negative due to the rising number of homes on the market.

Market Recovery and Price Sensitivity

As market conditions improve, particularly in northern England and Northern Ireland, the focus on pricing strategy is becoming crucial. Zoopla reports that 37% of sales are being agreed at more than 5% below the initial asking price. Despite lower mortgage rates driving demand, buyers are still cautious and price-sensitive, with a fifth of homes currently for sale having previously been on the market within the last two years.

Over a third of homes on the market have also had their asking prices reduced by up to 5% to attract buyers.

Regional Performance

a. Northern Ireland leads the way with home values up by 5.5% annually, following years of underperformance.
b. London has seen a modest price gain of 0.5%, bouncing back from price falls a year ago.
c. Areas in Scotland and Northern England are performing well, with prices increasing by up to 2.5% in the past year.

Meanwhile, Southern England, particularly in regions like the South West and South East, continues to see house prices remain lower than a year ago, with affordability pressures contributing to slower growth.

Outlook for Overseas Investors

For overseas investors, the UK market continues to offer opportunities as falling mortgage rates improve affordability and confidence in the market rises. According to Richard Donnell, executive director at Zoopla, "Lower mortgage rates are delivering a much-needed confidence boost to homeowners, many of whom have been waiting on the sidelines over the last two years."

However, the increased supply of homes, particularly in regions impacted by tax changes, is expected to keep house price growth in check. This balanced dynamic means that investors entering the market now can benefit from competitive pricing, while still enjoying steady, long-term growth.

Conclusion

With mortgage rates at their lowest in 15 months and increased activity across the UK market, now is an ideal time for overseas investors to consider UK property investments. The rise in sales, the growing supply of chain-free homes, and the long-term potential for capital growth make this a unique moment to explore opportunities in regions like the North-East, East Midlands, and Northern Ireland.

For those looking to make strategic investments in UK property, staying attuned to market dynamics and upcoming tax changes will be key to maximising returns.