UK Housing Market Update January 2025

The following are key headlines for the housing market in 2025: 

 

Availability of stock has increased in all price bands but is more concentrated in properties over £1million (TwentyEA). By the end of 2024, buyers had 605,000 properties to choose from, up 8.3% from 2023.

 

In 2024, residential property owners secured 97.1% of their initial asking price. With an average asking price of £407k, this equates to realising £395k (TwentyEA) 

 

The last quarter of 2024 was positive and compared to the last quarter of 2023, Sales Agreed increased by around 22%, possibly due to the lowered interest rate, which encouraged more positive buyer sentiment. This is especially encouraging and indicates that despite the dampening effect of the budget earlier in the year, market activity remains strong as the base rate falls.

 

Overall, 2025 looks to have healthy expectations for a growth market. Activity from the end of 2024 indicates a boost for listings into Q1. Predicted listing activity looks as though it will continue to stay fairly consistent with around 446,000 new listings estimated to enter the market, that’s within 6% from the same period in Q1 2024.  

These predictions can be attributed to Rightmove’s House Price Index which forecasted that average seller asking prices will also increase by 4%, the highest since 2021.

 

The Bank of England looks set to resume cutting interest rates in February after official data revealed a surprise fall in inflation. The bank opted for two rate cuts of 25 basis points each last year, taking base rate to its current level of 4.75 % by the end of 2024. Traders now expect to see between two and three quarter-point cuts in 2025, taking base rate at low as 4 % by the end of the year.

 

Stamp Duty Adjustment, March 2025: A significant moment this year will be the tax change at midnight on March 31, when the stamp duty threshold for first-time buyers reduces, making tax payable from £300,000, rather than £425,000. For those who are not first-time buyers the threshold will go down to £125,000 from £250,000. This will have the biggest impact on first-time buyers in the South East and London, where properties are most expensive. Data from the property portal Rightmove suggests only 8 % of homes in London will have a valuation that makes them stamp duty-free for new market entrants from April 1 onwards. Just 24 % of homes in the South East would be stamp duty-free. Rightmove says demand has risen in more expensive areas as buyers rush to complete purchases before the deadline to save money.

 

Build, build, build: The government has promised large-scale investment of £5 billion for housing, guaranteeing a boost in supply for 2025.

 

Autumn mortgage rate reductions anticipated by some experts: Analysts believe that a reduction in mortgage rates in autumn 2025 could trigger a mini boom in the market. Data from the analyst Oxford Economics forecasted that the average mortgage rate would fall from 4.57% today down to 2.64% at the start of 2027, where it will stay until 2029. However, the Office for Budget Responsibility, the government’s spending watchdog, thinks mortgages will stay higher for longer, a warning that was echoed by the Bank of England when it cut the base rate to 4.75 per cent in December.

 

Annual rental growth across the UK in November was 4.1% according to Zoopla, an increase from 3.6% in October. This included London, the most expensive rental market, where affordability had caused rental growth to slow. Many landlords are pessimistic about the future legislative environment, so an increase in rental stock is unlikely.