House price growth hits two-year high – when is the time to buy?

Falling mortgage rates and lower inflation have brought home buyers back to the property market in recent months, boosting house price growth.

The latest Halifax House Price Index for September 2024 shows average house prices rose for the third month in a row and annual price growth is at a two-year high of 4.7%, "the strongest rate since November 2022". This puts the average UK house price at £293,399, "just shy of the record high of £293,507 set in June 2022", said Halifax. 

Similarly, the Nationwide House Price Index for September put average annual house price growth at a two-year high of 3.2%, and the latest Land Registry House Price Index registered annual house price growth at 2.2% for July 2024.

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But the impending Autumn Budget on 30 October may "dampen demand" in the housing market, said MoneyWeek, "due to expected tax rises".

 What has happened to the property market in 2024? 

House prices fell for much of 2023, "attributed to a mixture of high mortgage rates, cost of living pressures and low market confidence", said The Times Money Mentor.

Many analysts were expecting similar declines this year, but the outlook has improved amid falling inflation. Home buyers have been "buoyed up", said The Guardian, by the Bank of England's interest rate cut in August and lenders have responded with "more competitive" rates.

This has prompted many commentators to revise their forecasts for house prices. Estate agency brand Savills last year predicted a 3% decline in UK house prices for 2024, but now forecasts that they will grow 2.5% "primarily due to falls in the cost of mortgage debt". 

Property firm Knight Frank is also now expecting UK mainstream prices to rise by 3% this year, which compares to a decline of 4% predicted in October 2023. 

Property sales are currently rising as buyers benefit from the lowest average mortgage rates for 15 months, said Zoopla, which is supporting "modest price rises, rather than causing any acceleration in home values". But buyers remain "price-sensitive" with 37% of sales currently agreed at more than 5% below asking price, so sellers must still "price sensibly" to agree a sale.

What impact will the Autumn Budget have on the housing market? 

Chancellor Rachel Reeves is due to deliver her Autumn Budget on 30 October, and there are warnings, said Proactive Investors, that fears of tax rises in the upcoming fiscal update had fuelled the recent "uptick in demand".

Property website Rightmove reported a 15% increase in the number of 'top-of-the-ladder' homes - properties with five bedrooms or more, during September. This could be down to lower mortgage rates tempting people to move, added the property website, but rumours of capital gains tax rises in the Budget means owners of larger properties may be tempted to sell now as they "could be particularly impacted by any upcoming changes".

Should would-be buyers wait or act now?

In an "ideal world," said Moneybox, the best time to purchase a property would be when both house prices and mortgage rates are low. But that's "rare and notoriously difficult". 

While rising prices "aren't the best news" if you are a buyer, said the HomeOwners Alliance, waiting for house prices to drop "may mean you never buy".

Rather than timing the market, wrote The Times Money Mentor, "you need to consider a price point for both that is comfortable for you" whether prices are rising or falling.