As part of our ongoing commitment to providing you with everything you need to know about the UK property market, we’re rounding up what happened during Q4 2024 and what to expect from the housing market in 2025.
After the rollercoaster of 2023, the overriding sentiment going into 2024 was uncertainty. Despite a few bumps in the road, 2024 turned out to be much more positive than expected from an economic point of view. Inflation hovered around its target for most of the year and, in good news for homeowners, the Bank of England started cutting interest rates. The headline statistic? The economy as a whole saw growth of 1% and it’s expected to continue in 2025 as interest rates are cut further.
So how has the property market changed in Q4 of this year? And what should we expect from the UK housing market in 2025?
House prices remain positive during Q4 2024
The UK house price index has seen its fair share of peaks and troughs since it hit record highs in August 2022 - plummeting following a disastrous Mini Budget that caused buyers to essentially abandon the housing market.
This was followed by mortgage rates increasing in both 2023 and 2024 - a result of rising inflation and base rate hikes.
As we reach the end of Q4, however, the market is much more positive. Inflation has slowed, interest rates are dropping and the Autumn Budget has been established. When we also take into account the base rate hitting 4.75% in November, it’s understandable that house prices are on the rise.
According to the Office for National Statistics, the average house price in Q4 2024 has increased by 3.5% year-on-year since the same period in 2023.
What does this mean for house prices in 2025?
On the back of this rising positivity heading into 2025, the forecast for price growth also remains strong. According to expert predictions, largely based on the Office for National Statistics, UK house prices in 2025 are expected to rise by 3.0% and hit an average price of £300,000. It’s also expected that prices across every region will recover to - or surpass - their 2022 peaks.
These same predictions also expect 2025 to be the year that a new housing cycle begins, once again led by London. The capital has struggled over the last decade but 4.0% growth next year is the first time it's forecast to lead the wider housing market since 2015.
As always, affordability and changes to legislation will determine the ceiling for growth across the market. The average salary is expected to outpace inflation for another consecutive year, which will also spur transactions, although this may be tempered by changes to Stamp Duty and other property taxes set to come into action in April 2025.
What will happen to the base rate in 2025?
As always, the wider market will be dictated by both the base rate and factors such as inflation. It’s expected that the Base Rate will hit 3.75% by the end of 2025, reducing borrowing costs and providing access to higher LTV borrowing as well as products across different niches.
This is ideal for first-time buyers who will also benefit from the various policies laid out by the Labour government.
That said, it’s important to consider how the Stamp Duty rise in April 2025 may limit price growth, which in turn could have an impact on the overall economic landscape.
Where are the fastest-growing regions in 2025?
If you’re considering a move it’s great to understand the outlook across various regions and which cities or areas may see price increases going forward. Likewise, if you’re already living in these areas, it’s always good to know how your property value might increase.
Savills recently re-evaluated their five-year forecast and while the numbers may have changed, the top areas have unsurprisingly stayed the same. Out of the entire UK, the North West, North East and Yorkshire remain the top three areas for price growth.
The North West is expected to see the highest growth - 29.4% over the next four years. This is closely followed by the North East and Yorkshire, which are both expected to see price rises of 28.2% over the same period.
Despite predictions that 2025 will be a return to form for London, it’s still expected to see the lowest price growth in the UK with just a 17.1% increase by 2029.
While these are wider regional predictions, it’s also important during your research to look into specific areas, as some of these are outperforming the wider regional averages.
What can we expect going forward?
Overall, there appears to be light at the end of the tunnel for the UK housing market in 2025. Transactions are expected to increase, although this is predicted to be based on individual regional performance and not uniform across the country.
While the cost of living will still impact overall affordability, the easing of inflation means house prices should build momentum and help kickstart transactions.
As always, when buyers are struggling with affordability, schemes such as shared ownership provide flexibility and opportunity. Demand is still high and supply is still low, so for homebuyers that have a location in mind shared ownership properties may offer an accessible route into desirable areas.
