The Intermediary – March 2025 - Flipbook - Page 44
RESIDENTIAL
Opinion
London’s mid-market
he first quarter of
2025 is almost over,
and while the early
indicators show a
stronger-than-expected
start to the year for
many parts of the residential sector, it
has not been without its challenges.
The property market and the
broader economy have had to adapt
to several major changes in recent
months, not least the first Budget
from a Labour Chancellor in a decade
and a half.
In October last year, Chancellor
Rachel Reeves announced several
fiscal policies that plunged the UK
economy into an era of uncertainty.
Foremost was the decision to increase
Government spending, which spooked
the bond markets and sent gilt yields
soaring to their highest levels since the
late 1990s.
Growing concerns about a potential
recession initially led to experts
predicting that the Bank of England
would tread more cautiously when
it came to further interest rate cuts
in 2025. However, the Bank has
continued to cut interest rates, with
its most recent cut from 4.75% to 4.5%
in February.
Elsewhere, uncertainty comes
from America in the form of Donald
T
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The Intermediary | March 2025
Trump, who since returning to the
White House has imposed hey
trading tariffs on Canada, Mexico, and
China, kicking off a trade war that has
sent shockwaves through the global
economy. Though the details are still
being hammered out, Trump signaled
plans to include VAT when calculating
tariffs levied on the UK.
Keeping confident
Despite these turbulent economic
conditions, mortgage activity has been
relatively robust, a surge in mortgage
approvals in December boosted
buyer confidence, and house prices
remain strong.
Halifax’s latest index reported a
monthly increase of 0.7% with annual
growth reaching 3%, pushing the
average price of property in the UK to a
new peak of £299,138.
On 1st April the Stamp Duty
threshold for first-time buyers
will come down from £425,000 to
£300,000, and given where average
prices are, it’s highly likely to
pull many more buyers into the
taxable bracket.
Areas with the highest property
values such as London have been
experiencing a rush to beat the
deadline, according to data from
Rightmove. Analysis carried out by
the property listings site found that
in London, just 8% of homes for sale
will be Stamp Duty free for first-time
buyers following the change.
Based on current levels of activity,
we expect a spike in approvals
in March 2025 as buyers aim to
complete before the Stamp Duty
threshold change.
Beyond Q1, it’s likely that
remortgaging will dominate market
activity this year, particularly as
mortgage rates come down.
Following the recent interest rate
cut from 4.75% to 4.5%, Bank of
England governor Andrew Bailey
gave a reasonably positive indication
there would be future cuts, although
he stressed that policy will be judged
meeting by meeting in terms of “how
far and how fast.”
Bank forecasts suggest a rise in
inflation this year, peaking at 3.7%
in the third quarter before returning
to the 2% target. The wider effect of
higher export costs to the US may
feed into higher inflation, however,
with any further base rate cuts made
“sustainably.”
Open reform
Elsewhere, the Government has been
working on making home buying
and selling a faster and more efficient
