Housing market defies economic gloom with steady recovery

The UK’s housing market is shrugging off the wider economy’s lacklustre performance this year to show its resilience, one expert claims.

While GDP, retail sales and employment figures have faltered, the property sector has found firmer footing after a shaky second quarter triggered by a stamp duty deadline in April.

Tom Bill, the head of residential research at Knight Frank, points to the surge of activity earlier this year as businesses scrambled to outpace looming US trade tariffs and domestic tax increases.

This frenetic pace gave way to a quieter period as markets caught their breath, followed by a recovery that has yet to meet lofty expectations.

‘Guess the tax rise’

Mr Bill says: “This summer certainly has echoes of 2024, where many played a seemingly endless game of ‘guess the tax rise’ before the Budget.

“The residential property market has followed a similar pattern, with a stamp duty cliff edge in April producing a few tumbleweed moments before the recovery kicked in.”

Bank of England data reveals that mortgage approvals in June aligned closely with the five-year average, signalling a stabilising market.

Despite rising swap rates driven by heightened inflation expectations, sub-4% mortgage options have remained plentiful, boosting homebuyer activity.

Rate cut predicted

Mr Bill says there were 5.7 new buyers in the UK for every new property coming to the market in Q2 – this ratio hasn’t been this low since early 2018, when Brexit jitters were high.

He said: “The fact it is such a buyers’ market means asking prices need to be realistic.

“The overall weakness in the UK economy means a rate cut this week by the Bank of England is highly likely, with markets pricing in a further quarter-point cut in November.”

He added: “The headache the Bank faces is that inflation has been more stubborn than expected, for reasons that include higher public sector pay awards and steeper employer national insurance costs feeding through to prices on the shelves.”