By Jonathan Cable
LONDON (Reuters) – British first-time home buyers will see affordability improve as prices rise slower than previously thought over the next few years – particularly in London – as uncertainty over government policy counteracts lower borrowing costs, according to a Reuters poll of property analysts.
An overwhelming 92% of respondents to an extra question in a September 3-15 poll said purchasing affordability would increase for those wanting to get on the property ladder.
“Strong wage growth is helping to narrow the affordability gap, while improvements across the mortgage landscape are sparking greater buyer interest and encouraging many who had been sitting on the fence to finally make their move into homeownership,” said Marc Von Grundherr at estate agency Benham and Reeves.
The Bank of England has cut Bank Rate by 125 basis points since mid-2024, and is expected to deliver another trim next quarter, although borrowing costs remain above pandemic-era lows.
However, there is speculation Finance Minister Rachel Reeves will have to increase taxes in her November budget to plug a roughly 20 billion-pound ($27.3 billion) shortfall and so dent available funds for buyers. The job market has also lost some steam.
The average British home price will rise 2.6% this year and 3.1% in 2026 and 2027, the median forecast of 18 property experts predicted. That is significantly less than the respective 3.5%, 4.0% and 3.5% forecasts given in a May survey.
In London, historically a big draw for foreign investors, prices were expected to rise 1.9% this year, 2.7% next and 3.8% in 2027. In May’s survey the increases were pegged at 3.0%, 4.0% and 3.8%, respectively.
“London has a ‘high end’ problem in that the current attack on wealth creators is not conducive with UK business people, city folk nor overseas buyers wanting to park their money here,” said Russell Quirk at estate agency eMoov.
“Values will be pressurised accordingly.”
Reeves has pledged not to increase taxes on “working people” which may leave her little option other than to go after the wealthy.
(Other stories from the Q3 global Reuters housing poll)
($1 = 0.7335 pounds)
(Reporting by Jonathan Cable; Polling by Reshma Ann Samuel and Indradip Ghosh; Editing by Andrew Cawthorne)