Increase in larger homes for sale, says Rightmove, as mortgage rates fall and fears of Labour tax raid grow

Rightmove reported that there has been a rise in the number of larger homes for sale in the past week, as sellers look to capitalise on buyers who can afford higher mortgages as interest rates fall.

Britain’s largest property portal reported that the number of larger detached houses (four bedrooms or more) coming onto the market is now 15 per cent higher than the same period last year.

Estate agents report that owner-occupied landlords are trying to sell their properties in a last-ditch effort to avoid a potential Labour capital gains tax hike or a further attack on their rental income.

Richard Franklin, of Franklin Gallimore Estate Agent in Tenbury Wells, West Midlands, told the Royal Institute of Chartered Surveyors’ monthly report: ‘The trend of owner-occupied property investors selling their homes over fears of a more draconian CGT regime continues.’

Early September usually sees a surge in homes coming onto the market as Brits return from their summer holidays and look to move in before Christmas.

According to Rightmove, before September, the market was mainly for smaller houses with two bedrooms or less, and the fewest larger houses.

However, this past week saw a sudden spike, reversing this trend.

The trend of larger homes coming onto the market is most noticeable in the East of England, where 21 percent more homes with four or more bedrooms came onto the market in the past week than in the same period last year.

In the southwest, 20 percent more larger homes also came onto the market last September than last year.

Tim Bannister, a property expert at Rightmove, believes falling mortgage rates are likely to be the reason for the spike in offers for larger homes

The mortgage rate cuts are most noticeable among people with larger deposits, who tend to be more active in the largest housing market.

The lowest five-year fixed-rate mortgage rate has fallen from 4.28 percent at the beginning of July to 3.77 percent today.

Bannister said: ‘This year we have seen more activity in the higher end than last year overall as people moving into this sector have faced peak mortgage rates and a lower supply of homes to choose from.

‘Since the base rate cuts we have seen a trend of more smaller and mass-market homes coming onto the market, but this past week we have seen an increase in activity in the higher segment again.

‘Some of the lowest mortgage rates since the mini-budget are now available for people with large equity.’

Another factor is growing speculation about a rise in capital gains tax (CGT) in the October 30 Autumn Statement.

CGT is the tax paid on the profit someone makes during the period they own an asset.

This could mean that landlords and owners of second homes in larger properties could be particularly affected by a possible increase in the VPB. Some will therefore now cancel their mortgage.

Currently, landlords and second home owners who pay a higher rate of tax pay 24 percent CGT on the profit they make when selling their home.

There are fears that CGT will be brought into line with income tax. This could mean CGT rates rising to 40 per cent for high rate taxpayers, or even 45 per cent for high rate taxpayers.

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The latest market research from the Royal Institute of Chartered Surveyors (Rics) has revealed that a number of estate agents and valuers are pointing to the rise in CGT as a possible cause of the sell-off.

Nigel Stone of Nigel Stone Surveyors in Llanarth, Wales, says council tax is also a concern for second home owners, with some councils doubling or tripling council tax for second homes in some locations.

“(We’re) seeing more homes coming on the market because of higher property taxes for second homes,” Stone said.

Will the housing market take off in the fall?

According to the latest Rics research, there has been a positive shift in the UK housing market, fuelled by the recent fall in interest rates.

Members reported increased buyer interest and sales figures, with industry professionals expecting prices to rise in the final months of the year.

This month’s report shows that Rics members are feeling more optimistic than ever since October 2022.

Tom Bill, head of UK housing research at Knight Frank, said: ‘This should be the strongest autumn market in three years, with transaction volumes and prices boosted by falling mortgage rates.

‘There is still uncertainty about tax increases in the budget, but financial markets are expecting almost six further rate cuts in the coming year. This would further reduce borrowing costs and stimulate demand after the relative decline in activity over the past two years.’