UK Property prices surge following interest rate cuts

The UK property market has regained momentum, with house prices seeing the most significant increase since January, breaking a three-month period of stagnation.

In July, house prices rose by 0.8%, pushing the average property value to £291,268, up from £289,042 in June, according to the latest house price index. This boost sets the annual growth rate at 2.3%. This uptick follows the Bank of England's decision last week to cut interest rates, ending a prolonged period of high rates. The anticipation of lower rates had caused many potential buyers and sellers to delay entering the market due to the impact on mortgages and borrowing costs.

The Monetary Policy Committee made a narrow decision to reduce rates by 25 basis points, with five votes in favor and four against. Governor Andrew Bailey emphasised the importance of "the accumulation of evidence about the medium-term outlook for inflation" in shaping the Bank's policy decisions, signaling ongoing caution.

The average property price rose to £291,268 from £289,042 in June, per Halifax's index.

London remains the UK's most expensive region, with average property prices now at £536,052, marking a 1.2% increase from the previous year. Since 2000, the average house price in London has surged by over 239%, compared to a national average increase of 207%.

Northern Ireland led the UK in house price growth, with an annual increase of 5.8% in July, up from 4.1% in June—the most substantial rise since February 2023. House prices in the North West have risen by 4.1% over the past year, bringing the average property value to £232,489, while Wales saw a 3.4% increase, lifting prices to a peak of £221,102, the highest since October 2022.

Scotland also experienced a notable rise, with the average house price reaching £205,264, a 2.1% increase from last year. In contrast, Eastern England saw a slight decline, with a 0.4% drop from last year, setting the average property price at £330,282.

In July, UK house prices experienced a 0.8% monthly increase—the most significant rise since the start of the year—bringing the average property value to £291,268 and marking an annual growth of 2.3%. This positive momentum aligns with the recent Bank of England base rate cut and declining mortgage rates, offering encouragement to those looking to remortgage, purchase their first home, or move up the property ladder. However, challenges such as affordability constraints and limited property availability persist.

Analysts express cautious optimism, noting that the property market has remained resilient despite the recent general election. The investment sector highlights continued growth in rent values, enhancing real estate's appeal compared to other assets, while confidence in commercial real estate is rebounding. Strategies focusing on well-capitalised borrowers targeting prime locations are deemed essential for navigating the evolving market landscape. Nevertheless, hurdles remain for renters and first-time buyers aiming to enter the housing market.

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