UK House Prices may be on the rise, but the market is slowly and surely becoming a buyers one.
This week’s Royal Institution of Chartered Surveyors (Rics) survey found that buyer demand had fallen by 14% last month. That compared to a drop of just 1% in January. Changes to stamp duty due to come in on April 1 will ensure that demand falls even further according to many property analysts. At that point, buyers will have to pay duty on properties at more than £125,000, compared to a minimum of £250,000.
Buyers still prefer to ‘watch and wait’
The Bank of England may have cut interest rates, but the ongoing cost of living crisis means many house hunters need the Base Rate to drop even further before they’ll venture into new homes territory. At the same time worldwide economic tensions as a result of US tariffs and the continued Ukraine war, are forcing many would-be buyers to wait until further down the line for a more ‘stable’ situation.
On the plus side for buyers more housing stock is entering the market, providing more choice and a less competitive market all round.
Simon Rubinson, Chief Economist for the surveyors professional body, confirmed that it appeared the market was losing momentum, but he wasn’t all doom and gloom.
“Looking beyond the next few months, sales activity is seen as likely to resume an upward trend with prices also moving higher,” he added.
Property prices are indeed expected to rise by the end of the year.
Lettings market remains stagnant but to pick up soon
The same can’t be said for the lettings market though, where tenant demand continues to lie flat. In February it was down 4%. Landlord instructions are down too – by 22% for last month. Admittedly it’s not the most popular time for rentals. In fact, 34% of surveyors said they expected rental prices to rise by the start of the summer.
One of the UK’s biggest mortgage lenders, HSBC, has reduced its mortgage interest rate by 0.25. This brings its standard variable rate down to 6.74% – the biggest drop in two years and a sign that the market may begin to pick up faster again.
The news comes in the light of the recent Halifax report which shows the average property price fell by 0.1% last month, bringing the typical value of a house in the UK to £298,602.
The drop surprised many analysts in the sector who were anticipating an even bigger rise in property. This was mainly down to an increase in the number of buyers trying to push through their house purchase prior to the Stamp Duty deadline on March 31. It also surprised analysts at Nationwide, whose figures have recorded six monthly property price increases in a row, including a rise of 0.4% for February.
Prices still rising year-on-year
Despite the monthly drop, Halifax reported a 2.9% increase for property prices year-on-year.
The building society’s head of mortgages, Amanda Bryden acknowledged there had been a last-minute rush on buying, but said that momentum had already faded by the time February had come around according to their figures. This, she added, was usually down to the time it typically took for a property transaction to go through.
HSBC had dropped its mortgage interest rate after the Bank of England introduced a rate cut of 0.25% last month. The latter is also expected to carry out two further interest rate cuts of 0.25% by the end of the year.
Net mortgage Lending increases
Meanwhile, figures from the Bank this week shows net mortgage lending in January was the highest its been since September 2022.
In terms of regional variations from the Halifax report, house prices in Scotland had increased by 3.8 per cent in February, with the average property now worth £213,014. In Northern Ireland homeowners saw a 5.9% increase, to £205,784 for a typical property there.
The rush to purchase property before the Stamp Duty cut-off next month is reflected in recent house price growth.
According to the Nationwide Building Society, property prices in the UK jumped 0.4% between January and February. And that figure is expected to increase even higher as buyers attempt to conclude their property transaction before the April 1 deadline. Incidentally, around 25,000 first-time buyers in England are expected to miss it, says Rightmove.
Right now, the average property price in the UK is £270,493, according to Nationwide’s latest findings.
The rise in property prices is the sixth increase in a row and a 3.9% annual rise.
Economist Ashley Webb of Capital Economics, believes it isn’t just the forthcoming Stamp Duty change that is increasing the value of property. The statistics, he said, implied that buyers were undeterred in general. To the extent that…”the housing market continues to shrug off both the weak economy and the recent rises in mortgage rates,” he said.
Flats fall from grace in UK property market
Meanwhile, one area of the market which isn’t faring quite as well as others, is in apartments (or flats). According to Zoopla figures, the values of flats has only grown 7% over the past five years, while houses have gone up by almost a quarter (24%).
Zoopla’s own analysis blames the period during the pandemic when house owners wanted more space, preferably houses with a garden. Its spokesman says the market in flats still hasn’t recovered from this. This is compounded with the fears over poor cladding in recent years.
Rightmove 4th most popular website in UK
Meanwhile, a report by online property portal Rightmove showed that a total of 16.4bn minutes was spent viewing properties on its website last year. That was a 6% increase on the previous year, and resulted in the portal being the fourth highest website in the UK for hits. Only the BBC, Reach newspapers and the government’s own website received more visits in the past 12 months.
Property prices grew 4.6% in December year-on-year, according to official government figures.
Published this week the HM Land Registry price House Price Index also showed an annual increase for November, albeit quite a bit lower at 3.9%.
The figures recorded the average property in the UK at £268,000 for the last month of the year. In terms of price increases, three areas stormed ahead – Northern Ireland, Scotland and the North East. House prices there grew 9.0%, 6.9% and 6.7% respectively.
No rise for London homeowners
That’s in sharp contrast to London where there was no growth year-on-year in December. And, in fact, property prices fell by 0.3% between November and December 2024. The high property prices in London mean that the least affordable areas of London were still higher than many of the more upmarket areas in the North East.
House values also increased in both England and Wales for the year to December 2024. This was at a lower rate – 4.3% in England and 3% in Wales.
Stamp Duty changes expected to impact prices
Analysts believe the property growth figures won’t be as spectacular towards the end of 2025. That’s because more homes are coming on to the market and, at the same time, Stamp Duty costs are reverting to their previous figures. That means having to pay stamp duty on properties priced £125,000 and over. First-time buyers will have to start paying tax on homes up to £300,000 (instead of £425,000). Higher-rate tax payers will also see an increase in capital gains tax, up to 24%.
The market is still expected to be busy however, thanks to a stabilising economy and lower mortgage interest rates. Wages have also gone up over the past year.
Yopa chief executive officer, Verona Frankish, said: “We’ve already seen one interest rate reduction so far in 2025 and it’s shaping up to be a year of even greater positivity where the property market is concerned.”
One in ten estate agents expect to see an increase in property sales over the next few months. At the same time around one third of agents predict they’ll get busier as the year progresses.
The news was garnered from the latest report compiled by the Royal Institution of Chartered Surveyors (Rics), while the growing optimism is down to last week’s cut in interest rates by the Bank of England. A further interest rate cut is expected this year, making mortgage rates even more affordable for prospective buyers.
Mortgage approvals increase 28%
Rics say it’s the ninth month in a row that sales instructions have increased. With an average 25 transactions per agent, it’s the highest figure since the start of lockdown in Autumn 2020. Meanwhile, listings are averaging around 45 properties per branch.
Recent statistics from the Bank of England show mortgage approvals are also on a high – 28% up on the same time the previous year.
Edinburgh is top property investment city
Meanwhile, Scotland’s capital city remains the top city for property investment. This is followed by Glasgow, Manchester and London. The Colliers’ Top UK Residential Investment Cities survey is carried out every six months and shows there has been little movement since last summer.
The biggest mover was Reading. The city fell out of the top 10 but is back at number five, thanks to an increase in new business in the area. Conversely, it was a lack of new business that caused Oxford to fall from fifth to ninth in the list. The other nations were represented by Belfast (in seventh position), and Cardiff in tenth.
Andrew White, head of UK residential at Colliers, said: “…there’s been a period of stability in the UK housing market, with locations that have been sure investments in recent times remaining at the top.”
The report looks at 20 cities in the UK, grading them against indicators such as population growth, leisure facilities, GDP, infrastructure, the number of multinational companies and EPC rankings for private rentals.
Private landlords in England and Wales could end up forking out thousands of pounds in order to get their properties compliant with new government energy efficiency rules.
Under the government’s Plan for Change initiative all private rental properties will have to meet minimum energy standards by 2030. Government analysts say the costs to upgrade to a new Energy Performance Certificate (EPC) level ‘C’ will cost landlords anything from £6,100 to £6,800.
The proposal is currently out to consultation, with landlords and renters urged to make their feelings known.
A spokesman for the Department for Energy Security and Net Zero said the move could benefit renters by cutting back their fuel bills to the tune of £240 a year.
Landlords to look at solar panels and cavity wall insulation
In order to remain complaint with the proposed legislation landlords will have to invest in double glazing, cavity wall insulation and other measures to ensure tenants remain warm in their homes. Solar panels and smart meters may also be considered.
Deputy Prime Minister and Housing Secretary Angela Rayner said: “Through our Plan for Change we are driving up housing standards, improving quality of life, and slashing energy bills for working people and families.
Ed Miliband, Energy Secretary, added: “These plans will also make sure that all private landlords are investing in their properties, building on the good work of many to upgrade their homes to Energy Performance Certificate C or higher already.”
Nearly half of landlords already compliant
The good news is that around 48% of private rental homes are already compliant with the new proposed government standards. The current EPC standard for private rental properties is ‘E.’
One of the proposals in the consultation is whether to give landlords an additional two years after the 2030 cut-off to get up to standard. Another is to limit the cap for landlords to a cost of £15,000 per property, while a third is to introduce an affordability exemption, limiting the cap to £10,000, for a property with a lower rent or a reduced council tax band.
Nationwide’s latest figures show a monthly rise in property prices of just 0.1% for January this year. That’s lower than previously predicted and an indicator that the cost of living and higher mortgage interest rates are still impacting would-be buyers.
Despite this, the figure is still 4.1% higher than house prices a year ago. It brings the cost of the average UK property to £268,213, according to the mortgage lender. Nationwide predict prices to rise by between 2% and 4% this year.
Only last week, data from online property portal Zoopla showed that January 2025 was already faring better than January 2024 and 2023. Demand was up 13% and 10% more properties were available for sale.
Quarter percentage cut expected to loosen mortgage rates
In terms of mortgage interest rates, analysts a predicting a quarter percent cut in the Bank of England base rate this Thursday. That would bring the figure to 4.5%. A total of three interest rates cuts are expected by the end of the year, so that affordability should improve for many house buyers. Certainly, current mortgage interest rates are nowhere near the 6.22% they reached in the summer of 2023, yet the 1.1% of summer 2021 remains a distant dream for many.
The market is currently experiencing a surge in sales, thanks to the rush to beat the Stamp Duty changes on April 1. Then, buyers will have to pay Duty on properties which are less expensive than at present. Meanwhile, property costs are historically high compared to earnings. The current property-wages ratio is 5.0 whereas typically the average is 3.9.
Fewer home owners amongst younger demographics
Figures from the latest English Housing Survey by the Ministry of Housing, Communities and Local Government (MHCLG), showed around 65% of homes were privately owned last year. Of those though, there was a significant drop in ownership between those aged 25 to 34 and 35 to 44, compared to two decades ago.
Buyers have more homes to choose from, interest rates are set to fall, and sellers will have to be more realistic regards pricing.
At least that’s the findings of the latest Rightmove report which reveals there are 11% more properties coming to market than at the same time last year. In fact, the number of properties listed for sale in estate agencies is the highest it’s been for more than a decade. The figures refer to January 2025.
Another plus for buyers is that, at £366,189, the average property value is now around 9% less than it was in May last year (when it was a record-breaking £375,131). Rightmove anticipates house prices will rise by 4% this year.
Hopes that mortgage interest rates may reduce throughout the year were boosted by a fall in inflation to 2.5% in November. Interest rates for a typical two-year fixed rate deal is currently sitting around 4.97%. For five-year deals it’s roughly 4.75%.
A spokesperson for Rightmove commented: “We’ve also seen a strong start to the year in new seller asking prices, though given the higher-than-anticipated seller competition, we would expect this to slow down over the next few months.”
Nationwide report gives glimmer of hope for first-time buyers
Meanwhile, a new report by Nationwide shows that property has become more affordable. Based on last year, the data found that a first-time buyer with a 20% deposit needs to typically allocate 36% of their take-home pay to the mortgage. Although the percentage allocation fell last year, it’s still higher than the traditional 30%.
An increase in the cost of living, added to a rise in the cost of renting makes it increasingly difficult for first-time buyers to save for a deposit – to the extent nearly half (40%) reveal they received financial help from family and friends. Around 54% of property transactions carried out last year were for first-time buyers.
But Yopa’s CEO Verona Frankish said only an increase in construction will really make the difference to affordability – for all sectors of society.
“We need to see the government deliver on its promises of building more homes if any meaningful progress is to be made with respect to addressing housing affordability across the nation,” she concluded.
The average property in the UK may cost £269,426 but that’s still lower than the peak of frenzied post-lockdown buying two years ago.
Then (August 2022) the figure for the typical UK home was £273,751. This is according to the last Nationwide House Index for 2024. Despite this, the December figure for 2024 is 4.7% higher than at the start of the year.
North-south divide continues unabated
The price increase indicates a clear north sound divide in England. Properties in the north of the country increased by 4.9% while in the south the figure was lower, at a more modest 2.2%.
Property analysts predict mortgage interest rates will fall this year – but not by much. And there’s no hard and fast rule as to when this will happen. The expectation though is enough to encourage buyers, with the first few months expected to be the busiest. That’s because the recent increased Stamp Duty allowances for first time buyers of £425,000 in England and Wales, and for those purchasing homes under the £250,000 threshold end on April 1. Last year first-time buyers made up 31% of all property sales.
Analysts predict 3% rise in property prices in 2025
Property agents Hamptons predict a 3% rise in house prices in 2025 and 3.5% the following year. Both they and property portal Rightmove believe this year will prove to be a buyers’ market for UK property. The latter predicts a rise in property figures for the London market of 4% over the next 12 months. They attribute much of this to major companies bringing employees back into the office rather than encouraging working from home.
Boxing Day property enquiries 20% ‘up’ on last year
Meanwhile the number of properties agents have on their books to sell is higher than any time within the past decade. In addition, Rightmove enquiries were 20% higher on Boxing Day 2024 than on the same day in 2023.
Landlords brace themselves for new regulations
The Renters’ Rights Bill is expected to be introduced in spring this year. One of the main concessions is that landlords will have to use a Section 8 notice to recover their property from bad or poor-paying tenants. It’s an area which is sure to prove newsworthy over the next 12 months. Watch this space…
This week’s decision to hold the Bank of England base rate will put a dent in house sales early next year say estate agents.
That’s because mortgage interest rates will remain the same, meaning property prices will still be out of reach to thousands of would-be buyers.
Two-thirds of bank committee voted for reduction
The Bank’s Monetary Policy Committee voted 6-3 to retain the rate at 4.75% rather than reduce it by 0.25 percentage points as some economists surmised. Those in favour of retaining the current bank rate said it was necessary in order to manage inflation. The Bank is currently aiming for an inflation target of 2%. Inflation sat at 2.6% last month – 0.3% higher than in October’s figure.
Despite this, many property experts are confident that there will be a fall in the base rate next year, and subsequently a drop in mortgage interest rates. Certainly, buyers and lenders alike will be hoping for a fall in rates as a result of Stamp Duty charges reverting to previous ratios on April 1.
Mortgage expert at property portal Rightmove, Matt Smith said he expected a typical mortgage interest rate to sit at around 4% by the end of next year. But he added: “This is dependent on the impact of a wide variety of unpredictable factors, including geo-political tensions and inflation.”
Former Royal Institute of Chartered Surveyors (Rics) chairman, Jeremy Leaf said a cut in the base rate would be particularly welcomed by first-time buyers, especially in light of increasing rental rates.
Scotland tops the league for house transactions
Meanwhile, in terms of property sales, Scotland topped the league for 2024. That’s according to recently released government figures. The Office of National Statistics data shows there were 54,428 property transactions north of the border, equating to 15% of the UK total.
The next highest region for property sales was the South East, with 14% of the total. Third was the North West, at 11%. Northern Ireland saw least properties sold, with a percentage rate of just 3.4%. Despite this, Belfast was the UK city in which most homes were sold, at 7333 properties. Second was Edinburgh and third, Glasgow. A total of 3994 properties were sold in Leeds, England’s highest city total, outside London.
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