House prices and sales volumes are expected to grow in 2025 despite Budget pressures, according to the latest House Price Index from Zoopla.
The average house price in the UK was found to be £267,200, up by 1.5% over the last 12 months.
The housing market returned to growth in 2024, with UK house prices recording average growth of 1.5% in the year to October 2024, up from a decline of 1.2% the previous year.
All regions recorded positive year-on-year growth, with the fastest gains in Northern Ireland (6.3%) and the North West (2.9%).
However, house price growth remained below 1% across South England due to ongoing affordability pressures.
Sales were expected to rise by 5% in 2025, reaching 1.15 million.
Sales agreed over the past four weeks are up 19% year-on-year, with buyer demand 25% higher.
The sales market is set for 1.1 million completions in 2024, 10% higher than in 2023. A robust sales pipeline, 30% larger than this time last year, is anticipated to deliver a strong start in early 2025.
First-time buyers were expected to remain the largest buyer group.
Higher household incomes have supported housing affordability, with disposable incomes increasing by 15% from 2022 Q2 to 2024 Q2.
Zoopla noted that UK homes were previously overvalued by 16%, but rising incomes and lower mortgage rates have remedied this situation without needing prices to fall further in 2024.
The North-South divide in house price inflation is expected to persist in 2025.
Areas with the fastest price rises include Oldham (3.7%), Wigan (3.9%), and Belfast (6.5%), while modest declines are seen in parts of southern England such as Ipswich (-1.1%), Truro (-1.2%), and Dartford (-1.2%).
Richard Donnell, executive director at Zoopla, said: “The housing market has been resilient in the face of higher borrowing costs over the last two years.
“Higher income growth and lower mortgage rates have helped reset housing affordability faster than many expected over 2024.
“This has supported an increase in the number of sales and house prices over the year which we expect to continue over 2025.”
Donnell added: “House price growth in southern England will continue to lag the UK average and incomes will need to rise faster than prices to help reset affordability and price more households into the market.
“First-time buyers will remain an important buyer group but existing homeowners looking to move will need more support to help realise their ambitions, with more and more having to look further afield to find better value for money.”
Matt Thompson, head of sales at estate agency Chestertons, said: “As we are approaching the end of the year, we are already seeing more buyers entering the market which is not typical for this time of year and a strong indication that 2025’s property market will be buoyant.
“One reason for the uplift in buyer activity are changes to stamp duty, announced in the Autumn Budget.
“These will come into effect in April 2025, driving first-time buyers in particular to get on the property ladder before that deadline and will fuel a busy start to next year’s property market.”
Thompson added: “Other buyer demographics, including families, couples, professionals and downsizers considered 2024 a challenging year to buy a property amid political and economic uncertainty but now feel more motivated to resume their search in the new year.
“Contributing to the return of buyer confidence are lower interest rates, slightly more attractive mortgage products and the fact that the market has benefited from an uplift in the number of properties being put up for sale.
“Despite house hunters having a slightly larger selection of properties to choose from in 2025, pent-up demand will result in most properties attracting multiple buyers which will make for a competitive property search – especially in London and other sought-after destinations across the UK.
“Due to an ongoing imbalance between supply and demand, most sellers will insist on achieving their asking price. As such, we predict properties in the capital to hold their value or see a gradual increase of up to 3 per cent over the course of next year.”
Article taken from the Intermediary
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