UK Property Market Update: Q1 2023
The start of the spring season sees stability and confidence beginning to return to the market as it improves from the reaction following September’s mini-budget. I think we can all agree that the pace of the market reached an unsustainable level in the last two years, so it is good to see signs of a more ‘normal’ market. While extraordinarily low mortgage rates are no more, many buyers will find comfort in having more time to plan and secure their next move as we enter the traditionally busy spring-buying season.
According to the latest Rightmove House Price Index, the average asking price for a property in the UK has increased by 0.8% (+2,906) this month to £365,357. This growth has been steady but consistent throughout this quarter.
The report also highlights that there has been a 6% increase in buyer demand this month when compared to the same period in 2019 showing that there is confidence in the market.
During March we see the highest number of enquiries from buyers searching for their first, next or forever home. With so many buyers looking for their next property, this makes the end of March into April and onwards the prime time to put your property on the market to achieve the best possible price.
The South East of England property market has seen a similar trend to the national market, with a rise in property prices and demand for properties with more space, both inside and outdoors. According to the Rightmove House Price Index, the average asking price for a property in the South East has increased by 1.2% in the past month, and 1.8% in the past year, reaching a new average price of £482,388.
UK rents continue to grow at a record pace of around 10% when compared to this time last year according to HomeLet. Demand is being driven by economic factors. The increasing cost of homeownership coupled with the increased cost of borrowing makes for a challenging jump for first-time buyers looking to make the move from renting to owning, meaning they stay put for longer.
Section 24 Changes
In other lettings news, the UK Association of Letting Agents trade group is urging the industry to support a parliamentary petition that is calling to scrap the Section 24 changes to buy-to-let landlord taxation. These changes remove the right of landlords to deduct finance costs from their rental income before calculating their tax liability, which means they must now pay tax on their gross rental income.
This petition has gained over 37,000 signatures so far, and if it reaches 100,000 signatures by the 10th of May, it is likely that a Parliamentary debate on the subject would take place. While this does not guarantee any changes to the law, it is an important step in raising awareness of the issue and puts pressure on the government to consider its impact on landlords and the wider property market.
The changes to Section 24 were introduced in 2015 and have been gradually phased in over the past few years. They were designed to level the playing field between owner-occupiers and buy-to-let landlords, as the latter had previously been able to offset their mortgage interest payments against their rental income, reducing their tax liability.
However, the changes have had a significant impact on landlords, particularly those with highly leveraged properties, as they are now required to pay more tax on their rental income, even if they are not making a profit. This has led to some landlords being forced to sell their properties or increase their rents, which in turn has put pressure on the rental market.
If you have any questions about the current property market, please feel free to reach out to our teams who would be happy to answer any questions you have.