UK property market basics

The UK housing market is really several markets. England, Wales, Scotland and Northern Ireland have different buying processes and property taxes, and prices move differently from one region to the next. This guide covers the basics: how a sale works, how prices are measured, and what moves them.

How a sale works in England and Wales

1. Valuation and marketing. The seller picks an agent, agrees an asking price and lists the home.
2. Offer. A buyer makes an offer through the agent. Once it’s accepted the home is usually marked “sold subject to contract” (STC).
3. Conveyancing. Each side’s solicitor or licensed conveyancer handles the legal work: searches, checking the title, raising questions with the other side. The buyer’s lender carries out its valuation, and the buyer may commission a survey.
4. Exchange of contracts. The point where the deal becomes legally binding. The buyer usually pays a deposit, and a completion date is fixed.
5. Completion. The money is transferred, the keys are handed over, and the buyer’s solicitor registers the new owner with HM Land Registry.

Until exchange, either side can pull out without legal penalty. That’s why gazumping (the seller accepting a higher offer after agreeing one) and gazundering (the buyer cutting their offer just before exchange) can happen. Sales from offer to completion commonly take several months, and longer in a chain.

How Scotland is different

In Scotland the seller must provide a Home Report before marketing. It includes a survey, a valuation and an energy report, so buyers know much more about the property upfront.

Homes are often marketed at “offers over” a set figure, and when several buyers are interested the agent may set a closing date for sealed bids. Offers are made through a solicitor, and the deal becomes binding once the formal letters between solicitors, called missives, are concluded. That tends to happen earlier than exchange in England, which makes gazumping much rarer.

Northern Ireland

Northern Ireland’s process is broadly similar to England and Wales, with offers subject to contract and a binding agreement only once contracts are signed. Sales are registered with Land and Property Services.

Property taxes on buying

Buyers pay a transaction tax when they buy a home above certain thresholds:

• England and Northern Ireland: Stamp Duty Land Tax (SDLT).
• Scotland: Land and Buildings Transaction Tax (LBTT).
• Wales: Land Transaction Tax (LTT).

Each has its own rates, thresholds and reliefs, including different treatment for first-time buyers and higher rates for additional properties. Thresholds change from time to time, so check the current figures on the relevant government website before you budget.

How house prices are measured

You’ll see several house price indices in the news, and they often disagree for a month or two. They measure different things.

• The UK House Price Index (UK HPI), published monthly by the Office for National Statistics with HM Land Registry and the other UK registers, is based on completed sales. It’s the most comprehensive, but it runs a couple of months behind because sales take time to be registered.
• Lender indices such as Nationwide’s and Halifax’s are based on each lender’s own mortgage approvals. They’re more up to date, but only cover buyers using that lender’s mortgages, so they miss cash buyers.
• Asking price indices from property portals track what sellers are hoping for on newly listed homes. They’re the earliest signal but measure ambition, not agreed prices.

None of them tells you what your home is worth. An index measures the average change across many sales. Your street can move differently from your region, and flats can move differently from houses in the same town.

What moves prices

Mortgage rates

Most buyers borrow, so the cost of borrowing has a big effect on what they can afford to pay. When rates rise, monthly repayments on the same loan go up and buyers can bid less. When rates fall, the reverse.

Supply and demand

Areas with plenty of new homes being built, or many homes coming onto the market at once, see more competition between sellers. Areas where few homes come up for sale, and buyers want to be there, see prices pushed up.

Wages and confidence

Over the long run, prices are tied to what people earn. In the short run, confidence matters: buyers hold back when they’re worried about jobs or prices falling, and rush in when they fear missing out.

Local factors

New transport links, school ratings, regeneration schemes and big employers moving in or out can all shift prices in one area while the national average barely moves.

Regional differences

Average prices vary enormously across the UK, from London and much of the South East at the top to parts of the North East, Scotland and Northern Ireland at the lower end. Growth varies too. Over some periods, cheaper regions have risen faster in percentage terms than London; over others the opposite has been true. National headlines are an average of very different local stories.

Seasonality

Activity in the housing market follows a rough yearly pattern. Spring is traditionally busy, with more homes listed and more buyers looking. Activity often dips in August and over Christmas. Index providers usually publish seasonally adjusted figures to smooth this out, so check which figure a headline is quoting.

Putting it together

If you’re trying to understand what your own home is worth, start local. Look at sold prices on your street and nearby, use an index only to adjust older sales to today’s market, and remember that the national picture is an average. Our guide to understanding comparable sales walks through how to do this step by step.