Welcome to NestInsights, your guide to the evolving UK property market. In this blog series, we explore the latest property news and developments that shape the sector, offering you the insights needed to navigate and thrive. Our goal is to provide a comprehensive overview that empowers you to make well-informed decisions in this dynamic market.
Table of Contents
Capital Gains Tax Rumors Spark Surge in Property Market Appraisals
Fixed Mortgage Rates Drop to Lowest Levels Since February
Stamp Duty Deadline Looms: First-Time Buyers Urged to Act Quickly
Economists Predict Upcoming Interest Rate Cuts by Bank of England
Rental Market Struggles as More Landlords Exit Amid Rising Costs
Understanding the New Renters’ Rights Bill
UK Property News Week 37
Capital Gains Tax Rumors Spark Surge in Property Market Appraisals
As the Autumn Budget looms, speculation around potential changes to Capital Gains Tax (CGT) has stirred notable activity in the UK property market. The anticipation that CGT could increase from its current level of 24% has led many property owners to accelerate plans to sell, aiming to complete transactions before any tax hike is announced.
According to Knight Frank, the number of market valuation appraisals surged by 25% in August 2024 compared to the five-year average in London.
This jump in appraisals indicates that many property owners, particularly those with high-value properties, are preparing to list their assets ahead of possible changes. The trend is most evident among owners of residential lettings portfolios, who face the added pressure of potential reductions in profits if the CGT rate rises. Some sellers are even willing to accept a price 5% to 10% below market value to avoid being caught by the anticipated tax increase.
The heightened activity is not confined to ordinary residential sales. Prime central London, where property prices have already been on a downward trend, saw a 0.2% decline in average prices in August 2024, marking the 16th consecutive month of negative annual change. In this segment, property owners are particularly motivated to sell ahead of the budget, as any rise in supply could further depress prices.
The situation has prompted a surge in listings, which could temporarily increase housing stock and put downward pressure on prices in certain segments. However, should the expected tax changes materialize, the long-term effect may reduce supply as investors recalibrate their portfolios, further influencing market dynamics.
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Fixed Mortgage Rates Drop to Lowest Levels Since February
In a welcome development for homebuyers and property investors, fixed mortgage rates have fallen to their lowest levels since early 2024.
According to the latest figures from the Moneyfacts UK Mortgage Trends Treasury Report, average two-year and five-year fixed rates both saw significant drops in August, with the two-year rate falling to 5.56% and the five-year rate to 5.20%.
This marks the second consecutive month of declining rates, bringing them back to levels not seen since February and March of this year.
The mortgage market has experienced volatility in recent months due to fluctuating swap rates and broader economic uncertainty. However, August marked a turning point, as lenders began to adjust their pricing strategies to reflect improved market conditions. The reduction in fixed rates follows the Bank of England’s decision to cut its base rate earlier in the summer, which has positively impacted tracker and standard variable rates (SVR), though fixed rates remain more attractive to many borrowers.
For prospective buyers, this decline in rates offers a window of opportunity. The difference between two-year and five-year fixed rates has persisted, with two-year rates averaging 0.36% higher than their five-year counterparts. This pricing dynamic may encourage borrowers to lock in longer-term deals, particularly those seeking stability in a market that has seen considerable uncertainty.
However, the product choice within the mortgage market has narrowed slightly, with the total number of available products dropping to 6,523 from 6,657 in the previous month. Despite this, the average shelf life of mortgage products increased to 21 days, suggesting that while fewer products are available, lenders are offering more stable options for a longer period.
Stamp Duty Deadline Looms: First-Time Buyers Urged to Act Quickly
With a critical change to stamp duty rates approaching in April 2025, first-time buyers are being encouraged to move swiftly to avoid increased costs. Currently, first-time buyers in England benefit from a higher nil-rate stamp duty threshold of £425,000, meaning those purchasing below this amount pay no stamp duty.
However, from 1st April 2025, the threshold will revert to £300,000, significantly affecting many first-time buyers.
As a result of this change, those buying properties between £300,000 and £425,000 will face stamp duty fees that were previously avoided. This move is expected to disproportionately impact first-time buyers in London and Southern England, where property prices are higher. In London, for example, first-time buyers purchasing a property valued at £625,000 could see their stamp duty bill rise from £5,000 to £20,000—a substantial £15,000 increase.
Currently, approximately one-third of first-time buyers in England could end up paying more stamp duty after the April 2025 deadline. In Southern England, stamp duty receipts already make up 81% of the total, further highlighting the regional impact of this policy shift. The average first-time buyer in London will face a stamp duty bill of £5,600 compared to £0 today.
While buyers in the North and Midlands are less likely to be affected due to lower average house prices, those looking to purchase in higher-priced regions are advised to act now. With the average property sale taking around 25 weeks from listing to completion, time is running out for those hoping to benefit from the current stamp duty relief.
Economists Predict Upcoming Interest Rate Cuts by Bank of England
As the UK grapples with stubborn inflation and slower economic growth, economists are increasingly predicting that the Bank of England (BoE) will implement additional interest rate cuts by the end of 2024.
Following a recent reduction that brought the base rate down from 5.25% to 5% in August, economists believe further cuts are on the horizon, potentially pushing the rate to 4.5% by year’s end.
The Bank’s Monetary Policy Committee (MPC) made the decision to reduce rates in a close 5-4 vote, signaling the central bank’s cautious approach to monetary easing. Despite inflation remaining above the 2% target, BoE Governor Andrew Bailey has stressed the need for "careful" reductions in borrowing costs to balance economic growth with inflation control.
The forecasted cuts have already begun to positively impact market sentiment. UK estate agents have reported increased buyer enquiries following the initial rate reduction, with some expecting the trend to accelerate if further cuts are confirmed. According to a recent Reuters poll, 49 out of 65 economists anticipate at least one more rate cut in November, while others predict an additional cut in December.
Rental Market Struggles as More Landlords Exit Amid Rising Costs
The UK rental market is under significant pressure as more landlords are exiting the market due to rising costs, regulatory changes, and increasing mortgage rates. Recent data from Zoopla reveals that the average number of renters competing for each available property has soared to 21, more than double the pre-pandemic levels. This competition is driven by a 24% drop in available rental properties compared to pre-pandemic figures, further compounding the supply issue.
Landlords have been facing mounting financial pressures, particularly from higher mortgage rates and tax changes introduced in recent years. Since 2016, more than 12.5% of homes listed for sale on Zoopla were previously rented properties. The lack of new investment in rental housing has exacerbated the supply shortage, creating a surge in demand and pushing rents up by 30% over the past three years.
Average monthly rents in the UK now stand at £1,245 as of July 2024, an increase of £63 compared to the previous year.
Despite a slowdown in rent growth—down to 5.4% from the previous year’s rate—rent increases are still outpacing wage growth, which currently stands at 5.1%. This has led to an affordability crisis, especially in regions where rental demand remains high.
Speculation around potential tax changes in the upcoming Autumn Budget has only added to the uncertainty. Many landlords are opting to sell their properties before any further legislative changes come into effect, which could push more properties out of the rental market, further driving up rents in already supply-constrained areas.
Understanding the New Renters’ Rights Bill
The UK’s rental market is undergoing a significant shift with the introduction of the Renters' Rights Bill, designed to provide tenants with greater security and improve housing conditions across the private rented sector. One of the most notable reforms is the abolition of Section 21 evictions, often referred to as "no-fault" evictions.
This change will prevent landlords from evicting tenants without providing a valid reason, giving renters more stability and the confidence to challenge poor living conditions without fear of retaliatory eviction. In 2023 alone, nearly 26,000 households faced homelessness due to Section 21 evictions.
The Bill also expands Awaab’s Law into the private rented sector, aiming to ensure that homes meet basic safety and decency standards.
More than 21% of private rental properties in the UK are currently classified as "non-decent," and this legislation will push landlords to make improvements where necessary.
Under the new rules, local councils will have the power to impose fines of up to £7,000 for serious breaches.
In addition, the Renters’ Rights Bill will end blanket bans on renting to people with children or those receiving benefits. This will increase access to housing for vulnerable groups, ensuring that more renters can secure a home without discrimination. To prevent exploitation of tenants, landlords will also be prohibited from conducting bidding wars for rental properties, where prospective tenants are forced to offer higher rents than the advertised price.
Another key element is the restriction on in-tenancy rent increases, limiting landlords to raising rent once per year and only to match market rates. This reform is intended to protect tenants from sudden and significant rent hikes during their tenancy.
Takeaways
Speculation over potential Capital Gains Tax increases has led to a 25% rise in property appraisals, as sellers rush to complete transactions before the expected tax hike.
Fixed mortgage rates fell to 5.56% for two-year deals and 5.20% for five-year deals in August, presenting a favorable opportunity for buyers despite a narrowing product range.
First-time buyers need to act before April 2025, when the stamp duty threshold will drop from £425,000 to £300,000, potentially increasing tax bills by up to £15,000 in higher-priced regions.
Economists forecast further interest rate cuts by the Bank of England, possibly bringing the base rate down to 4.5% by the end of 2024, spurring renewed buyer interest.
A shrinking supply of rental properties, with availability down 24% from pre-pandemic levels, is driving rents higher as landlords exit the market due to rising costs and regulatory pressures.
The Renters' Rights Bill will abolish Section 21 evictions, enforce stricter housing standards, and end discriminatory renting practices, providing tenants with more security and rights.
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