The property survival information for Labour’s Britain: ELIZABETH ANDERSON

Britain’s property market is in the midst of enormous tumult. 

Buyers and sellers are bracing themselves for the fallout of next month’s Budget, landlords are preparing for yet more regulation in the form of the Government’s new Renters’ Rights Bill, and homeowners are scrambling to take advantage of falling mortgage rates.

The result is rapidly changing prices and supply of properties on the market, and a very varied picture across the country.

At first glance, the market looks in rude health. Prices are rising sharply – at their fastest rate in two years, according to Nationwide, the UK’s largest mortgage lender. They increased by 2.4 per cent in the year to August to £265,375 on average.

But it’s not all good news for homeowners. Beneath the surface, hidden undercurrents and other dangers could still knock prices off course.

Money Mail has spoken to agents across the country to take the temperature of the property market and find out how these latest trends could play out – and whether now is the time to buy, sell or sit tight.

More choice of homes

Figures for Money Mail from property listings website Zoopla show that in some areas of the UK, the number of homes for sale was up by more than 40 per cent in August compared with the same month a year ago.

As many as 100 out of almost 120 postal areas saw an increase in homes for sale year-on-year. 

Affordability is also improving thanks to falling interest rates. The Bank of England base rate fell from a recent high of 5.25 per cent to 5 per cent in August, resulting in lower monthly mortgage payments for borrowers.

Areas that have seen a sharp rise in supply include County Durham in the North East, Dorchester in the South West, Lancaster in the North West and Falkirk in Scotland.

Such is the increase that the stock of homes for sale now stands at a seven-year high, adds Zoopla, giving buyers more choice and power to negotiate on price.

 The trend is self-perpetuating. More homes are coming on to the market as sellers feel more confident that they can find somewhere they in turn may wish to buy.

Economists expect interest rates to drop close to 3 per cent in the next couple of years, so the trend for lower mortgages should continue.

Yesterday Santander became the latest lender to cut rates and the first this year to offer a two-year fixed-rate deal below 4 per cent.

In short, a new price war has broken out, which is excellent news for buyers.

Landlords are selling up

However, the increased supply in properties is also being driven by less positive factors.

Nervous landlords are preparing themselves for an attack in the autumn Budget on October 30 – the first under this Labour government.

 Fear is mounting that ­Chancellor of the Exchequer Rachel Reeves will announce an increase to the capital gains tax rate for ­landlords who sell investment properties.

Landlords currently pay capital gains tax of 18 or 24 per cent on profit they make when they sell, ­depending on whether they are a basic or higher-rate taxpayer.

But Labour may choose to raise the rate in line with income tax. This would mean landlords ­paying 20 to 40 per cent on capital gains, ­depending on whether they are a basic or higher-rate taxpayer. 

Additional-rate taxpayers would pay 45 per cent. 

And that is not the only pressure leading landlords to flood the market with properties for sale.

The Renters’ Rights Bill is going through Parliament again after being abandoned by the ­Conservatives in the summer. The new bill put forward by Labour goes further than the initial Conservative proposals.

So-called ‘no fault’ evictions, which allow landlords to remove tenants without giving a reason, will be banned. 

Among other rules, landlords will have a new obligation to ensure a ‘decent homes standard’ and will not be allowed to turn away ­prospective tenants simply because they have children or are on benefits. 

The prospect of higher taxes, in addition to further regulation, means growing numbers of landlords are selling up – or plan to soon.

A recent poll by the National Residential Landlords Association (NRLA) found 31 pc plan to cut the number of properties they rent out, compared with 9 pc who plan to increase them.

In a Facebook group of almost 50,000 UK landlords, the despair is clear. One landlord posted last week that he plans to sell his last two rentals because he ‘couldn’t put up with the hassle and ­turmoil any more’. 

Many agreed, saying they could get better returns in a cash savings account paying 5 per cent interest.

However, Simon Bridgland, director at financial advice firm Release Freedom, warns it’s now likely too late for landlords to complete on the sale of a property before any changes to capital gains tax come in.

‘Dinner-party landlords [amateur landlords with one or two properties], who can ill afford a grab to the wallet by

Ms Reeves, seem to have the biggest jitters,’ he says.

Selling to beat tax changes

Lawyers say wealthy property owners are enquiring about gifting property to family members now to get in front of potential changes to inheritance tax and capital gains tax in the Budget.

Others are downsizing with the aim of releasing cash to give to their children or grandchildren as soon as possible.

Labour did not mention inheritance tax in its General Election manifesto but there is speculation the 40 per cent inheritance tax rate could be raised or tax reliefs curbed.

However, with the Budget just a few weeks away it is unlikely that homeowners could successfully complete sales ahead of it. 

Moving simply for the sake of escaping any changes to inheritance tax may not make sense, especially as Ms Reeves may stop short of making dramatic tweaks.

Gifts are currently free of inheritance tax – regardless of size – so long as you live for at least seven years after making them. 

The clock only starts ticking once you have made the gift – although the tax rate gradually tapers from 40 per cent to zero, so if you do die within seven years the full 40 per cent tax may not be payable.

Lorna du Sautoy, a partner at law firm BDB Pitmans, says: ‘While landlords and owners of second or holiday homes may be looking to sell as quickly as possible before the October budget, we are also finding high-net-worth property owners making gifts of property – especially to children of the family – to expedite the transfer of assets and get in front of potential changes to inheritance tax and capital gains tax.’

School fees skew the market

Plans to add 20 per cent VAT to ­private school fees from next year is shaking the property market.

Families who can no longer afford private school fees because of the tax are looking to move within the catchment areas of top state and grammar schools.

Homes in catchment areas of good state schools can now attract a 20 per cent premium, according to property firm Savills. 

Its analysis found that people are paying 21 per cent more for homes within two kilometres of schools with outstanding Ofsted ratings.

Lili Oliver, of Bristol buying agent Oliver Roth, says demand for four-bed semi or detached houses near highly regarded state schools is higher than usual.

‘I recently represented clients on purchases in the hot areas of Redland, within the Redland Green school catchment area, which went to best and final offers and sold for above the guide price within a week of being listed.

‘Those with very young children will happily swallow £100,000 above the asking price (which they can spread over 20 years on a mortgage) versus ever-increasing private school fees,’ she adds. 

Francesca Watson, co-founder of buying agency Otters Home Search, which covers the Bath, South Cotswolds, Wiltshire and Somerset areas, agrees that school fees are high on the minds of affluent buyers with young families. 

She is attracting a lot of clients moving out of London or returning from abroad who like the idea of cheaper school fees in the South West compared with London and the South East.

Watson says private school fees are typically around 20 per cent cheaper in the South West, which is appealing at a time when VAT of up to 20 per cent is being introduced.

These buyers typically have a budget of £750,000 to £3 million and are looking for a four-bedroom home, ideally detached. 

From Bath you can get to London in an hour by train and villages on the outskirts of Bath, including Bathford and Biddestone, are particularly popular.

‘Buyers want turnkey properties as they are cautious about the high cost of renovation work currently due to higher prices of materials and a shortage of builders,’ adds Watson. ‘There are deals

to be had as houses are typically selling for five to ten per cent under the asking price.’ 

First-time hopefuls

First-time buyers have declined in recent years, hit hard by higher interest rates that have pushed up monthly mortgage payments and reduced how much they can borrow. 

There were 293,339 first-time buyers in the UK in 2023, according to the comparison website Finder. This was down by 21 per cent from 2022 and by 28 per cent from 2021.

However, there are signs first-time buyers are coming back to the market as interest rates fall again. There is also currently an added time pressure to take advantage of a stamp duty discount. 

First-time buyers currently benefit from 0 per cent stamp duty on the first £425,000 of a property purchase. With no confirmation yet of these perks being extended, North London estate agent Jeremy Leaf believes now could be a good time for first-time buyers to get on the housing ladder.

‘Mortgage rates are also softening, which is helping with affordability. There is more choice of property, with quite a lot of landlords selling up, so there may be some opportunities here,’ he adds.

Paul Beresford, chief executive of estate agency Beresfords, adds he’s also seen a substantial increase in first-time buyers. ‘Many are looking for new apartments or two to three-bed terraces. 

‘Now that interest rates have come down and with a good number of cheaper mortgage products available, this is creating a general increase in activity across the market.’

It remains the case that many first-time buyers are buying with the help of the Bank of Mum and Dad. 

Parents are often gifting more than £50,000 to their children, says Karen Noye, a mortgage specialist at Quilter. Big cities including ­London, Manchester and Bristol are popular for their good employment opportunities and social scenes but they are expensive.

‘Parental financial support is ­crucial, given the high costs ­associated with buying a home

and the stretched affordability of ­mortgages. This extra deposit money often helps first-time buyers have slightly lower loan-to-values, which keeps the monthly mortgage costs down,’ she adds.

Wealthy buyers are nervous

Trevor Kearney, founder of luxury property firm The Private Office, says buyers looking for properties above £5 million are waiting to see what’s in the Budget before committing to a purchase.

‘Our new Prime Minister is doing all he can to frighten off any wealth in the UK,’ he says. ‘People have become nervous about spending more money in the UK when they are being taxed even more.

There are reports about rises in stamp duty, council tax, income tax and capital gains tax, which would affect high-net-worth buyers, and we already know VAT on private school fees is coming in.

‘Some are putting their homes up for sale and relocating to places such as Dubai, Barbados or Jersey, which are all more tax-efficient.’

Vivienne Harris, an estate agent in Hampstead, North London, agrees that in prime property areas there

is currently little interest from wealthy overseas buyers. Sales are dominated by Britons.

‘Sellers remain constant, with upsizers or downsizers and everything in between selling for divorce, death, marriage and babies. Investors are also looking to come out of the market. 

The consensus is that many buyers and sellers are nervous of what is coming by way of increased taxation and wish to have cash available in order to have financial flexibility over the next two to three years,’ she adds.