Despite a turbulent economic backdrop, the housing sector demonstrated resilience, with house prices showing modest growth and transaction levels recovering. As we step into 2025, the market is poised for further shifts, influenced by interest rates, stamp duty revisions, and other key factors. Let’s take a closer look at the defining trends of 2024 and explore what the future holds for UK property.
The year began with whispers of a potential housing market crash, fuelled by high inflation and escalating interest rates. However, the market defied these gloomy predictions, showcasing its underlying strength and adaptability.
So, what happened to House Prices
Contrary to initial concerns, average house prices in the UK witnessed an annual increase of 2.9% in the year to September 24. This upward trend was propelled by a confluence of factors, including a gradual easing of mortgage rates, a resurgence in buyer demand, and the persistent challenge of limited housing supply. While this figure represents the average across the UK, it’s important to note that regional variations existed, with some areas experiencing more robust growth than others. For instance, London saw a slight decrease of -0.5% in the same period. The average house price in the UK was £267,500 as of November 24.
In 2024, the performance of different property types varied depending on location and market conditions. Flats in London, for example, experienced a slight dip in prices, while houses in the Northwest and Northeast saw more significant growth. The buy-to-let market also showed signs of recovery, with increased purchasing activity in the early months of the year, potentially driven by the slight dip in house prices and the anticipation of falling interest rates.
What about sales volume, The UK property market witnessed a resurgence in transaction levels in 2024. In August 24, an estimated 90,000 residential properties were sold, marking a 5.4% increase compared to August 23. This rise in activity suggests a renewed sense of confidence in the market, with both buyers and sellers demonstrating a greater willingness to engage in property transactions. The total number of residential property transactions in October 24 increased to 111,100, with the market showing no signs for cooling.
As we all know, interest rates play a pivotal role in shaping the UK property market and 2024 was no different. After reaching a 16-year high of 5.25%, the Bank of England implemented two interest rate cuts, lowering the base rate to 4.75% by November 24. This reduction in borrowing costs provided welcome relief to mortgage holders and played a significant role in the recovery of both house prices and transaction levels. Lower interest rates could potentially improve affordability and encourage more first-time buyers to enter the market.
Another major influencer is Stamp duty and it remained a crucial consideration for buyers and investors in 24. The Autumn Budget introduced an unexpected increase in the stamp duty surcharge on second homes, raising it from 3 to 5%. This measure aimed to provide an advantage to first-time buyers and those seeking to move house, potentially impacting buy-to-let investment, and rental supply. In addition to the surcharge on second homes, the Autumn Budget also increased the higher rate of stamp duty for corporate bodies from 15 to 17%. In the wake of the Autumn Budget, buyers exhibited increased price sensitivity, potentially impacting transaction levels and price negotiations.
Other Influences on our sector.
Beyond interest rates and stamp duty, several other factors exerted influence on the UK housing market in 2024, Economic conditions and the cost-of-living crisis and persistent high inflation continued to weigh on household budgets, potentially affecting affordability and demand for property.
The government’s commitment to affordable housing initiatives, shared ownership schemes, and reforms to the rental market played a role in shaping market dynamics. The persistent shortage of housing supply remained a significant challenge, contributing to upward pressure on house prices, particularly in areas with high demand. This issue was further exacerbated by rising construction costs and labour shortages.
So, as we enter 2025: What Lies Ahead?
As we navigate into 2025, the UK property market is anticipated to undergo further evolution, with interest rates, stamp duty adjustments, and other key factors shaping its trajectory.
House Prices
Most forecasts anticipate moderate house price growth in 2025, with projections ranging from 1.1 to 4%. While the pace of growth may differ across regions, the overall trend is expected to remain positive.
Regional variations are expected to be a defining feature of the UK property market in 25. Some areas are predicted to outperform others in terms of house price growth and market activity. For instance, the North-west, North-east, Yorkshire and the Humber, and Scotland are all forecasted to experience a 5% rise in house prices. In contrast, the South-west and East of England are expected to see more modest growth of 2.5%. London and the South-east are projected to fall somewhere in between, with an anticipated 3% growth.
The performance of different property types in 25 is likely to be influenced by local market conditions and investor sentiment. Flats in some areas may experience slower price growth compared to houses, while the buy-to-let sector could face challenges due to changes in stamp duty and regulations.
What about the all-important Interest Rates, Interest rates are poised to continue their downward trajectory in 2025, with forecasts suggesting a base rate of around 4% by the end of the year. This sustained reduction in borrowing costs is expected to bolster affordability and stimulate market activity. It could also lead to increased re-mortgaging activity as homeowners seek to secure more favourable deals.
Stamp duty thresholds are scheduled to revert to their original levels from 1 April 25 . This means buyers will be required to pay tax on any amount exceeding £125,000, instead of the current threshold of £250,000. The first-time buyer threshold will also revert to £300,000 (from £425,000). These changes could potentially impact affordability and dampen demand in the short term, particularly for first-time buyers and those in the lower to mid-market price range.
Other Factors
In addition to the factors mentioned above, several other elements could influence the UK property market in 2025: The overall economic performance of the UK will have a significant impact on consumer confidence and investment decisions, potentially affecting demand for property. Any new housing policies or stimulus measures introduced by the government could influence market dynamics, particularly in the new build sector. The persistent imbalance between housing supply and demand will continue to be a key factor, potentially keeping house prices elevated in certain areas.
Industry Experts offer a range of perspectives on the UK property market in 2025. Some predict a “buyer’s market” with increased negotiating power for house hunters. Others anticipate a period of stability and soft growth, with a more balanced market emerging. There is also a growing consensus that regional variations will be more pronounced, with the more affordable markets in the north experiencing stronger house price growth.
My Conclusion
The UK property market has navigated a challenging 2024 with resilience, defying expectations of a major downturn. As we move into 2025, the market is poised for further evolution, with interest rates, stamp duty changes, and other factors shaping its course. While challenges remain, the overall outlook is cautiously optimistic, with modest house price growth, increased transaction levels, and continued demand for housing expected. However, regional variations and the performance of different property types will be key factors to watch.
For those considering buying, selling, or investing in property in 2025, it’s essential to stay informed about market trends, seek professional advice, and carefully assess individual circumstances and goals.
Pick the right agent, price your home correctly and market it in a professional manner, then homes are still selling, for increasing higher values. If you would like a chat about where you sit in the current market, do not hesitate to give me a call on 01522 512 513 or drop me a message on social media.
