Buyers are back, if the price is right

Stasis in the UK property market continued through September. House prices climbed 0.5% during the month, Nationwide reported this morning. That brings annual growth to 2.2%, a slight uptick from 2.1% in August. 

Activity levels are no different; lenders approved 64,700 mortgages for home purchasers during August, down 500 on the previous month, the Bank of England reported on Monday. That headline number has moved by less than 1,000 for three consecutive months. 

This is positive, all things considered. Mortgage rates have plateaued – leading two year fixed rates now sit at about 3.80%. The November budget provides a disincentive to act, but many are anyway. Mortgage approvals are just a shade below the 2019, pre-pandemic average. 

Good value

Scratch the surface and it's easy to see where tax speculation ahead of the budget is being felt the most. Over the past five weeks, searches for £1 million-homes via Rightmove dropped 11% compared with the same period last year, the company reported this week. Demand for properties above £500,000 is 4% lower.

Knight Frank data from prime London provides more nuance. The number of offers made in prime outer London dropped 6% in the three months to August compared to the five-year average, – see Tom Bill's Monday piece for more. Interestingly, prime central London is moving in the other direction; offers made during the same period climbed 9% compared to the five year average. 

This is about value. Average prices in PCL have fallen by 20% over the last decade, while POL prices are down just 6%. This has narrowed the price premiums between various locations, and buyers now perceive many parts of prime central London as good value. In Chelsea, for example, the median sold price has fallen to £1,182 psqft, from £1,359 psqft back in 2015. That means buyers paid a 21% premium to live in Chelsea over Fulham this year, compared to 47% ten years ago. Similarly, buyers paid a premium of 22% to live in Bayswater compared to Islington versus 34% a decade ago. Meanwhile, a 75% gap between Belgravia and Richmond has narrowed to 29% over the last decade. 

Green shoots

This heightened sensitivity to value is evident elsewhere in the property market – Ollie Knight has a good piece on the new homes market this week. While all the evidence suggests that buyers have adjusted to circa 4% mortgage rates, consumer confidence remains fragile and buyers have plenty to choose from.

That means that the ability of developers to demonstrate value – whether through pricing, design, or positioning – is having a significant impact on sales rates. Ollie highlights The Broadley in Marylebone, by Mount Anvil, where buyers have reserved 63 units since the launch in early July. 

Asking prices have averaged £1,450 per square foot during these initial sales, allowing buyers to secure early-phase value – both compared with neighbouring projects now in their later, more expensive phases and relative to the higher prices expected in subsequent phases at The Broadley itself. The development has also seen a notable resurgence of off-plan investors, some purchasing five years ahead of completion.

That latter point is particularly interesting, and is one of a number of green shoots appearing. Molior's Tim Craine has a few more over on LinkedIn, namely an uptick in activity among smaller developers, Related Argent logging London’s first built-to-rent start of 2025 in Brent Cross, and heightened activity from Berkeley on Old Kent Road and Southall and Ballymore in Cuba Street in Canary Wharf. 

Back into play

These green shoots need nurturing, and only by removing some of the major blockers on development will we see an enduring turn in the market. At least one barrier appears to be in play; the Greater London Authority is looking at lowering the proportion of affordable homes developers must provide when trying to fast-track planning, the FT reported over the weekend. Most councils currently want 35%.

"It is unclear what target is now being considered but the industry has pressed for between 10 and 15%," the paper said, citing people familiar with the matter. We've also heard that a drop from 35% to 20% is mooted for the fast track route, though nothing is confirmed. The industry has also pushed for changes to the late stage review process – we'll have to see on that point. 

This will unlock schemes, and officials should be commended for pragmatism should it come to pass, but I'm sceptical whether it would be enough to spark a dramatic shift in output – almost certainly not one that would bring the government's ambitious delivery targets back into play. 

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Elsewhere - UK households step up saving in worrying sign for growth (Times), UK's Institute of Directors reports record-low business morale (Reuters), Blackstone has agreed to acquire a €2 billion portfolio of warehouses in France (Bloomberg), UK Draws Japan Property Investors Eyeing US Hedge on Turmoil (Bloomberg), and finally, New York’s vacant offices converted to housing at highest rate since 2008 (FT).