Asking prices fall as Budget hits buyer demand

There was a drop in asking prices for homes coming on to the market this month, but market activity remained stronger than last year.

Property website Rightmove reports that average new seller asking prices were down by 1.4% (£5,366) in November. It's a bigger fall than the 0.8% decline usually seen at this time of year, after the UK government's Autumn Budget unsettled the market ahead of the Christmas slowdown.

However, the outlook is optimistic with the number of sales being agreed still 26% ahead of the quieter market at this time in 2023. More properties are also being listed, with the number of new sellers currently 6% ahead of the same period a year ago.

What's more, there are early signs of an uptick in buyer demand following the Bank of England's second cut in interest rates, although activity is still expected to tail off as usual towards Christmas.

'Modest upwards pressure' expected in 2025

With the continued strength in market activity compared to last year and optimism for lower mortgage rates in 2025, Rightmove's forecast is that average new seller asking prices will rise by 4% in 2025 -- its highest prediction since 2021. Lower mortgage rates are likely to release some pent-up housing demand, putting modest upwards pressure on prices.

Despite this prediction, the market is expected to remain price-sensitive as sellers face more competition to attract a buyer amid a decade-high number of other sellers. At the same time, Bank Rate cuts are now forecast to be slower-paced and this could delay the affordability improvements that some movers have been holding out for.

"There's been a lot of news to digest for home-movers over the last few weeks and it appears that the market may still be chewing it over," said Tim Bannister director of Property Science at Rightmove.

"We had been seeing a drop-off in buyer demand, both in the lead-up to the Budget and in its immediate aftermath, as it was confirmed that there will be an increase to stamp-duty charges for most home-movers and second-home buyers, and some first-time buyers. However, a second Bank Rate cut and a boost of optimism regarding 2025 appear to have reversed this trend at least temporarily.

"Zooming out of these short-term trends, the big picture of market activity remains positive when compared to the quieter market at this time last year. This sets us up for what we predict will be a stronger 2025 in both prices and number of homes sold, particularly if mortgage rates fall by enough to significantly improve affordability for more of the mass-market."

Twists and turns

In recent weeks mortgage rates have been creeping as a range of factors, including the Budget and the US election result, increased borrowing costs in general.

Analysts expect the Bank of England to maintain the Base Rate at 4.75% in December, with more cuts forecast in 2025. Depending on what's happening in the wider economy, the benchmark rate could fall to about 4% over the next 12 months.

Some "twists and turns" in the property market are anticipated in 2025, Bannister said.

"The speed at which mortgage rates come down next year will be key in determining activity levels for some of the market's traditionally busiest periods, and sellers will still need to price temptingly enough to secure a buyer while the choice of homes for sale remains as high as it is right now," he concluded.