Following the release of the latest UK Construction PMI today (4 November) and with the Bank of England’s (BoE) interest rate decision expected at 12pm, Martin Longmore, Partner at MHA, says the end of the stamp duty holiday failed to rein in demand and the jury is out whether a rise in interest rates and mortgages will put the brakes on either:

“Those fretting that the recent end of the stamp duty holiday would dampen demand in the UK housing market needn’t have worried. Most house price indices continue to show annualised increases of between 6% and 10%. Demand is also outstripping supply with sellers still not tempted to enter the market and the supply of new properties hampered by raw material and labour shortages.

“However, if the Bank of England announces any changes to the interest rate later today, or at its next meeting in December, this picture could look very different. With the rate of inflation above the BoE’s target of 2%, Monetary Policy Committee members are under increasing pressure to put up base rates. Indeed, mortgage companies have already withdrawn a significant number of their most attractive deals pending the announcement today. 

“Markets have factored in a limited number of base rate rises through 2022 though nobody expects these to be dramatic. As such, the jury is very much out as to whether action on interest rates (if it happens) will have a big impact on UK house prices.

“The commercial property market in the UK remains turbulent. Landlords are struggling because they’ve had to provide concessions during the worst of the pandemic. They’re also facing weak demand and dealing with office tenants still bewildered over what the need for spaces over the long-term might be. The announcement of the acquisition of urban regeneration specialist U+I by property giant Landsec this week, for £190m in an all-cash deal, does imply that there may be some confidence returning to the market.”