Despite geopolitical uncertainties, fading consumer confidence, and a general shortage of spare cash after Christmas, the housing market has had a busy start to the year.
The latest Zoopla House Price Index for January 2025 shows new sales agreed are up 12% annually, while buyer demand has increased by 13%. This follows a recent report from Zoopla, which showed house prices rose two per cent in the year to December 2024 at £267,700, compared with a 0.9% drop in 2023.
The demand is driving up house prices.
The typical property rose in value by 0.7% in January to an average of £299,138, according to the Halifax house price index. There was a surge to a record high a day after the Bank of England cut interest rates and signalled more are on the way.
Despite ongoing affordability pressures. Prices are 4.1% higher than a year ago, according to Nationwide’s House Price Index, and 0.1% higher than this time last month.
Buyers seem to be rushing to beat the drop in stamp duty thresholds and avoid higher property tax bills.
Currently, first-time buyers only start paying stamp duty once the value of a property exceeds £425,000. The threshold is £250,000 for home-movers.
This will fall to £300,000 and £125,000 respectively from April, adding thousands to the cost of a home. The market is overheating as buyers rush to avoid the tax.
At Continuum we are looking at what may happen next.
More rate cuts on the way?
The Bank of England cut base rate in the first week of February, and there are probably more to come as the bank attempts to boost the economy.
The consensus view is that Bank Rate may fall to 3.5% by the early part of next year. This may see mortgage deals falling from 4.6% in December to around 4% by 2026, making larger mortgages more affordable. It might mean house prices continue to move upwards.
Looking in the estate agents’ windows
The trend across the country is one thing, but what are the actual increases in house prices?
According to online property index Zoopla, the highest growth in average prices last year was in Northern Ireland, up 7.7%, followed by a 3.2% in the North West of England.
Prices are rising more slowly in Southern England, below 1.5%. where prices are already above average.
Data from Zoopla suggests that buyer demand is 13% higher than a year ago, with 10% more homes for sale and 12% more sales agreed. The average estate agency branch now has 31 homes listed for sale on its books.
But will this growth continue after April?
Zoopla has forecast a 2.5% rise in house prices this year. Estate agency brand Savills is even more positive, with predictions of 4% annual growth across the UK in 2025.
Others are more cautious. Knight Frank has warned that there is still post-Budget uncertainty about tax rises and has downgraded its previously bullish forecasts for house price growth, bringing them in line with Zoopla and 2.5% in 2025.
What could derail a price increase?
There are some factors that could put a stop in rising prices.
Apart from higher stamp duty from April, a large number of borrowers are coming to the end of sub-4% mortgage deals. Many buyers may feel stretched.
There could be a glut of smaller homes as Buy-to-Let investors get out of the market. Plus of course, there is fear of a downturn, despite the rate cutting from the Bank of England.
Things might be clearer when the stamp duty holiday ends.
What about your house buying plans?
You might be holding off buying for a further drop in borrowing costs as interest rates come down. However, the potential savings could be wiped out by a further rise in house prices.
A prudent strategy could be to come and talk to us at Continuum.
We can help you look at the costs of buying now and find you the most appropriate deal from the entire lending market.
Whatever your house plans for 2025, make your first move a call to us.
Halifax UK | House Price Index | Media Centre
https://moneyweek.com/investments/house-prices/house-prices
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to a particular mortgage product and you should seek independent financial advice before embarking on any course of action.
You may have to pay an early repayment charge to your existing lender if you remortgage
Your home or property may be repossessed if you do not keep up repayments on your mortgage
The value of property investments and income from them can go down as well as up and investors may not get back the amount originally invested.
The Financial Conduct Authority does not regulate taxation advice and some aspects of Buy to Let mortgages.
