Housing Market Forecast: Will Budget Halt Momentum?

This housing market forecast shows stability in October, with industry data revealing a modest uptick in annual house price growth. However, experts warn that this tentative confidence could be derailed, as buyers and sellers alike hold their breath in anticipation of the forthcoming Autumn Budget.

New figures from the Nationwide House Price Index reveal that annual property price growth increased to 2.4% last month, a slight rise from 2.2% in September. On a monthly basis, growth slowed to 0.3%, bringing the average UK house price to £272,226.

This resilience comes against a challenging economic backdrop, prompting cautious optimism from property experts who see a market “regaining its footing.”

Modest Growth in the Housing Market Forecast

According to Nationwide’s chief economist, Robert Gardner, the market has remained “broadly stable.” This performance is noteworthy, as mortgage rates remain more than double pre-pandemic levels. Furthermore, house prices are still hovering near all-time highs.

The stability is supported by mortgage approval numbers, which have been maintained at levels similar to those seen before the pandemic. This suggests a consistent level of buyer demand, despite widespread consumer caution and signs of a weakening labour market.

Several underlying factors appear to be bolstering the market:

• Strong Household Finances: In aggregate, the ratio of household debt to disposable income is at its lowest point in two decades.
• Income Growth: There are positive signs that income growth may soon outpace house price growth, which would modestly improve affordability.
• Moderating Borrowing Costs: Hopes remain that if the Bank of England lowers the base rate in the coming quarters, borrowing costs could ease further, supporting buyer demand.

A Tale of Two Markets: Buyer Affordability vs. Seller Realism

While the headline figures suggest stability, they mask a divided and complex picture on the ground. The current market presents both “challenges and achievements in almost equal measure,” notes Nathan Emerson, chief executive at Propertymark.

The Affordability Hurdle

For those already on the property ladder, rising prices simply translate into more equity. For first-time buyers, however, the challenge intensifies. The combination of high prices and costly mortgages means attaining a foothold on the housing journey remains incredibly demanding.

Three base rate dips have helped affordability. However, stubbornly high inflation, nearly double the Bank’s target, keeps significant pressure on household budgets.

The Need for Realistic Pricing

For sellers, the market is far from straightforward. Iain McKenzie, chief executive of The Guild of Property Professionals, highlights that while fundamentals are “encouraging,” the trajectory is “steady rather than spectacular.”

A key shift is the increase in available housing stock. With more choice available, buyers are in a stronger negotiating position and are unwilling to overpay. This has forced sellers to adjust their expectations. Data indicating that one in three properties has required a price adjustment underscores this trend. Experts agree that sellers who price sensibly from the outset are achieving faster sales and better outcomes.

Budget Shadow Looms Over Housing Market Forecast

The single biggest factor creating uncertainty across the sector is the impending Autumn Budget. Past fiscal events, such as the Stamp Duty threshold changes earlier this year, have already been shown to disrupt sales trends.

Now, experts report that many potential buyers and sellers are “holding out” to see what changes the government will announce, effectively pausing transactions.

Tom Bill, head of UK residential research at Knight Frank, warns this has created a “two-speed market.” While stable mortgage rates have supported demand in the general market, uncertainty over potential property tax changes has caused prices to fall in higher-value areas.

This caution is currently concentrated at the market’s top end. Consequently, it could gradually sap momentum from the wider market, despite positive fundamentals.

Outlook: Steady, But Dependent on Policy

Looking towards the end of the year, the consensus is one of cautious optimism. Leading indicators, such as the tangible lift in mortgage approvals, often signal increased transaction volumes in the months to come.

Most experts anticipate that growth will remain modest but consistent. However, the market’s medium-term health appears to hinge almost entirely on the Autumn Budget and any new policies affecting housing or taxation. The market has proven its resilience, but its future trajectory now rests heavily on the Chancellor’s next move.