UK House Prices on the Rise

UK House Prices on the Rise: What to Expect in 2025

The UK housing market has started 2025 on a stronger footing compared to the previous two years, with buyer demand up by 13% and sales agreed increasing by 12% year-on-year. There are also 10% more homes available for sale, providing greater choice for buyers.

This increase in market activity has led to a 2% annual rise in house prices, marking a significant improvement from the -0.9% recorded at the end of 2023. The momentum from last year has carried into 2025, driven by greater consumer confidence, stabilising mortgage rates, and the impact of forthcoming stamp duty changes in April.

Key Market Trends

1. Increased Housing Supply and Buyer Demand

The number of homes on the market has risen by 10% compared to this time last year, marking the highest level of January listings for seven years. This increase in stock is providing buyers with more options, which is helping to keep price inflation under control.

At the same time, demand from buyers has increased by 13% year-on-year and is 26% higher than at the start of 2023. This uptick in activity has been driven in part by more homeowners and renters looking to move, as well as first-time buyers seeking to secure a property before changes to stamp duty come into effect.

2. Stamp Duty Changes Driving Early Buyer Activity

The Autumn 2024 Budget confirmed that stamp duty rates will increase from April 2025 in England and Northern Ireland, affecting both first-time buyers (FTBs) and existing homeowners.

As a result, first-time buyer demand surged by over a third in November and December 2024, particularly in properties priced between £300,000 and £625,000, where stamp duty costs are set to rise the most. Conversely, demand has remained more stable in properties below £300,000, where first-time buyers will still benefit from tax relief, and in properties above £625,000, where stamp duty relief was never available.

For home movers, the additional cost of stamp duty—up to £2,500 per transaction—has led to a moderate increase in activity, but the impact has been less pronounced than in the first-time buyer market.

3. Regional House Price Growth Trends

House price inflation is not uniform across the UK, with regional variations shaping local markets:

Strongest growth: Northern Ireland (+7.7%) and the North West of England (+3.2%) are leading the way, driven by rising employment and relative affordability.

Moderate growth: Cities such as Manchester (+3.6%), Liverpool (+3.5%), and Sheffield (+2.9%) are seeing steady house price increases.

Slower growth in the South: House price inflation in London (+1.4%), Oxford (+1.2%), and Cambridge (+1.0%) remains more subdued due to higher property prices and affordability constraints.

The town of Wigan in the North West recorded the fastest house price growth in 2024 (+5.6%), followed closely by Motherwell in Scotland (+4.9%).

4. Housing Affordability is Improving

Despite the rise in house prices, affordability is gradually improving. Mortgage rates have stabilised in the 4–5% range, and earnings growth has outpaced house price inflation for two consecutive years.

With wages rising by more than 5% annually, affordability is slowly resetting, particularly in regional markets with strong job growth. This trend suggests that house prices could continue to rise at a moderate pace, particularly in areas where employment opportunities are increasing.

What’s Driving the Market?

Several factors are influencing the market’s positive start to 2025:

Buyers Acting Before Stamp Duty Increases – Many are rushing to complete purchases before the April tax changes take effect.

Rising Homeowner and Renter Confidence – 17% of homeowners and 22% of renters plan to buy within the next two years, reflecting a greater willingness to move.

Higher Stock Levels Supporting Market Activity – With more properties on the market, buyers have greater choice, and sellers are pricing more competitively to secure a sale.

Market Outlook for 2025

The early indicators for 2025 suggest that the housing market will remain active throughout the year. Analysts predict that UK house prices will rise by 2.5% by the end of 2025, with an estimated 1.15 million property transactions, representing a 5% increase in sales compared to 2024.

While some buyers are hurrying to complete before April, demand is expected to remain strong beyond this date, particularly as the Bank of England considers potential base rate cuts later in the year.

With affordability slowly improving, mortgage rates stabilising, and more properties coming onto the market, 2025 is shaping up to be a strong year for both buyers and sellers.

If you’re considering moving, now could be a great time to take advantage of the favourable market conditions. Get in touch with Sinclair Estate Agents for expert advice and guidance on buying or selling your home in 2025.

Source - Zoopla