A Strong Start for the UK Housing Market

The housing market in 2025 has begun on a positive note, with increased buyer activity and an optimistic outlook for the year ahead. Compared to the past two years, more people are now looking to purchase homes, and the market momentum from 2024 has carried over into the new year.

Market Trends and Buyer Demand

Buyer demand has risen significantly, now 13% higher than a year ago, with a 10% increase in homes for sale and a 12% rise in agreed sales. The upcoming removal of stamp duty relief in April 2025 has also triggered a surge in first-time buyer (FTB) demand, particularly in price brackets where tax increases will be most significant.

UK house price inflation currently stands at +2.0%, a notable improvement from -0.9% last year. Inflation rates vary across the UK, with Northern Ireland leading at 7.7%, followed by the North West at 3.2%, while the East of England sees a more modest 1% increase.

There has also been a clear rise in the number of households planning to buy homes either now or within the next two years. Currently, 22% of renters are looking to purchase their first home, while 17% of homeowners are considering a move.

UK House Prices and Market Performance

As of December 2024, the average UK house price is £267,700, reflecting a 2% increase over the year. Projections suggest that by the end of 2025, house prices could rise by 2.5%.

Price growth varies depending on property type:

• Detached houses: £450,000, up 1.3%
• Flats: £191,600, up 1.1%
• Semi-detached houses: £274,200, up 2.8%
• Terraced houses: £236,000, up 2.7%

The supply of available homes has also increased, with estate agents now holding an average of 31 properties per branch—the highest number recorded in January for seven years.

Stamp Duty Changes Driving Market Activity

The October 2024 Budget introduced higher stamp duty rates in England and Northern Ireland, effective from April 2025. This has resulted in a surge of buyers rushing to complete purchases before the deadline.

FTB demand increased by over a third in November and December 2024, particularly in the £300,000 - £625,000 price range, where stamp duty will see the largest rises. However, demand for properties under £300,000, which will remain exempt from stamp duty, has grown at a slower rate.

Although the deadline for reduced stamp duty is fast approaching, there is no sign of a sharp decline in buyer interest. FTB demand remains higher than last year, in line with broader market trends.

Earnings Growth and Housing Affordability

Despite mortgage rates remaining within the 4-5% range, housing affordability is gradually improving. A key factor is that wages have been rising faster than house prices since December 2022, with annual earnings growth exceeding 5%. This trend is expected to continue in areas with strong employment growth and lower property prices, supporting sustained market activity.

Regional House Price Inflation

House price inflation has increased across all UK markets. However, the recent price increases are beginning to stabilise, as mortgage rates edge higher and the growing number of available properties provides buyers with more choice. This should keep house price inflation moderate in 2025, although the north-south divide in price growth is likely to persist.

Increased Interest in Buying Homes

Despite concerns that buyer demand may slow after April 2025 due to stamp duty increases, market data suggests otherwise. More people are actively looking to buy property compared to this time last year.

According to Zoopla’s Monthly Consumer Tracker:

• Over 20% of renters plan to purchase a home within the next two years, largely due to rising rental costs.
• Just under 20% of homeowners are looking to move, while 25% are keeping a close watch on the market for the right opportunity.
• Many prospective buyers had previously postponed their decisions due to high mortgage rates but are now returning to the market, anticipating interest rate cuts in 2025, which would improve affordability.

Market Outlook for 2025

The start of 2025 has been stronger than both 2024 and 2023, setting the stage for a steady year of market activity. While some buyers are rushing to complete purchases before the stamp duty changes take effect, this is unlikely to cause a dramatic shift in overall demand.

Looking ahead we expect:

• Three in five first-time buyers will still pay no stamp duty after April, which should limit the long-term impact of the tax change.
• A healthy supply of homes on the market will help control excessive price inflation.
• UK house prices are expected to rise by 2.5% in 2025.
• Home sales are predicted to increase by 5%, reaching 1.15 million transactions for the year.

With rising wages and expected interest rate cuts, housing affordability should continue to improve, supporting a resilient UK property market throughout 2025.