Oversupply in the UK property market is putting downward pressure on prices, according to Home.co.uk's House Price Index for November. Even the formerly top-performing northern regions are now showing growth below the rate of inflation. Buy-to-let investment had previously been a key driver, but negative real capital gains and sliding rents are weakening that support.
The broader economic outlook is also weighing on the market. Rising unemployment and expectations of tax increases in the November budget are reducing the number of potential buyers and limiting their purchasing power. As a result, the market is gradually adjusting, most likely through lower prices and rents rather than dramatic shocks.
As the festive period approaches, more on-market price reductions and competitive listings are expected. Vendors should anticipate offers coming in below asking prices as buyers gain the upper hand.
There is some optimism around mortgage rates. A cut in the Bank of England base rate is increasingly priced into the two-year swap rate, expected to coincide with the Monetary Policy Committee's December meeting. The meeting will follow the release of the Autumn Budget on November 26th. The Chancellor has signalled that higher taxes on the wealthy may be included in the budget, with potential reforms affecting inheritance tax, capital gains tax, property tax, and pensions. Uncertainty over these measures, combined with potential base rate changes, is likely to delay buyer activity and contribute further to the slowdown. Inflation remains well above the BoE target, so any rate cuts are expected to be modest, if they occur at all.
Sales and price trends
In October, the mix-adjusted average asking price for England and Wales fell 0.4%, leaving annualised growth at just 0.4%. The North East and Yorkshire saw the largest month-on-month declines, highlighting that even previously strong regions are now under pressure. Across the country, annualised home price growth continues to lag behind inflation, with overall real growth estimated at -4.2%. This means that even the best-performing regions are suffering losses in real terms.
A glut of unsold stock continues to influence the market, with the total portfolio count for England and Wales reaching its highest November level since 2013. Vendor numbers have also swelled, with October recording 7% more new instructions than the same month last year. The largest increases were seen in the East Midlands, Wales, and the West Midlands, all up 11% year-on-year, reflecting that some investors are exiting the market.
Regionally, Yorkshire remains the growth leader with a year-on-year gain of 3.2%, although this is still below inflation. The South West and London are among the weakest performers, with annualised declines of 1.3% and 0.9% respectively. Despite strong summer sales throughput, unsold stock has not reduced significantly, and the typical time on market for unsold properties has increased by eight days compared with last November.
Rental trends
Rental growth is also softening, with national annualised asking rents now down 3.7%. Every English region, along with Scotland and Wales, recorded year-on-year declines, and Wales experienced the steepest fall at 11.6%. In London, the picture is more mixed. Seventeen of the 33 boroughs saw positive asking rent growth, up from 13 last month. Kensington and Chelsea remains the slowest market, with typical time on market at 37 days, while Waltham Forest is the fastest at 12 days.
