Second steppers hunting for larger homes drive house prices higher

According to new figures, house asking prices rose again in September after a summer dip thanks to rising demand from second-movers looking for larger homes.

The average asking price for a home rose 0.7 percent this month to £367,760, reversing its decline from 1.3 percent in August. On an annual basis, prices rose by 8.7 percent.

The market remains “surprisingly resilient” and that the stamp duty cut announced in the mini-Budget could stimulate more demand – and push prices up even further – in the coming months, Rightmove said.

Price growth this month was mainly driven by the ‘mid and upper segments’ as demand for three to four bedroom homes increased 2 percent compared to last year’s ‘frantic market’.

Average asking prices for second-step homes rose 0.5 percent in the month to a new all-time high of £340,513.

“These numbers suggest that for those who can, climbing the ladder to a home with more space remains a priority, even at a time when personal finances are tight,” said Tim Bannister, Rightmove’s director of real estate science.

On the other hand, demand from first-time buyers in the market declined as affordability continued to come under increasing pressure after steep price increases in recent years and the rising cost of living.

The average asking price for a starter home rose 0.2 per cent to £224,479, with an annual growth rate of 7.4 per cent.

The government has announced massive stamp duty cuts to ease the burden on new buyers, but experts have warned it could have the opposite effect.

The threshold from which stamp duty is levied in England and Northern Ireland will rise from £125,000 to £250,000 and from £300,000 to £425,000 for new buyers.

Rising: Average asking prices rose 0.7% this month after a dip in August

It means two-thirds of homes are now stamp duty-exempt for first-time buyers in England, and one-third of all homes are exempt for all buyers, Rightmove said.

The real estate website said the cuts could provide “some support” for those trying to get up the housing ladder, but also: warned that they could stimulate more demand and push prices even higher.

“Demand has slowed down in recent months, but Friday’s announcement is likely to stimulate some more demand,” Bannister said.

“If it leads to a big jump in potential buyers competing for the limited number of properties for sale, it could lead to some unusual price hikes in the coming months.

“The change to the first-time buyer threshold means we can move more first-time buyers who can afford it, to a bigger home as a first step.

“With increased buyer demand, we would also expect the current trend of more homes to come on the market to continue, giving buyers more choice.”

Chestertons director Richard Davies thinks the stamp duty cuts could “trigger home hunters who had previously suspended their searches to resume operations.”

“If this additional demand is not met quickly, the tax cut could amplify the existing supply-demand imbalance, which then leads to an initial spike in property prices,” he concluded.

Overall buyer demand is just 2 percent lower than the same period in 2021 and still 20 percent higher compared to the five-year pre-pandemic average, Rightmove said.

Meanwhile, supply has increased as the number of homes coming on the market rose 16 percent this month, marking a return to 2019 levels.

London, which saw its strongest monthly price decline last month, saw prices rise the most in September – by 2.1 percent. Year-on-year, however, prices rose 6.9 percent, making the capital the slowest-growing region.

Prices in Wales and the West Midlands fell 0.6 percent and 0.4 percent respectively in the month, although they were some of the fastest growing regions during the year.

Richard Freshwater, director of Chefins estate agents in Cambridge, said: ‘The property market has been driven by insufficient supply for decades, and while there have been reports of a slowdown in demand, particularly for new build properties, we have seen key regional markets keep blooming.’

According to Matthew Thompson, head of sales at Chestertons, rising interest rates are causing some buyers to rush to pay off their mortgages before raising interest rates further.

“We are dealing with an increasing number of house hunters who want to secure a home as quickly as possible and take out a fixed-rate mortgage,” he says.

“This has helped keep the property market busy and competitive in September.

“As the cost of living crisis looms, we are also seeing some buyers compromise on their priorities to secure a home within their original budget.”

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