797, 000 £ 1, 163, 705 - 7. 6%
645 £ 38. 3b n 15, 083 M ORTGAGE AP P ROVALS (DEC)
STEADY FOUNDATION
The economic backdrop sets the stage for steady market activity and moderate price growth throughout 2025. Expected interest rate cuts should improve affordability, attracting a broader range of buyers to drive price growth.
ECONOMIC FORECASTS
Amidst conflicting news reports, the latest economic forecasts from HM Treasury provide a modest improvement for both the economy and the housing market in 2025. Economic growth is expected to be slightly stronger over 2025 (+1.2%) compared with 2024 (+0.8%). Meanwhile, inflation is forecast to sit just above target rates at 2.7%, but significantly better than the high rates seen in 2023 and early 2024, and likely not high enough to stop the Bank of England from cutting interest rates. In the latest MPC meeting, interest rates were reduced from 4.75% to 4.5%, marking the lowest level since June 2023, positive news for home buyers. Rates are forecast to drop from 4.5% currently to 3.75% by the end of 2025. While much of this is already priced into fixed mortgages, there could be some further downward shifts in these rates. This economic backdrop should amount to a solid year for transaction activity in the housing market, with prices likely to grow by a similar level to 2024*.
DEMAND
Demand continues its upward trend observed since April 2024. Gross mortgage lending rose to £21.4bn in December, up from £20.8bn a month earlier, while mortgage approvals were 28% higher year-on-year (Bank of England). Transaction levels were also up, reaching 96,330 in December, a 18.7% rise compared to a year earlier (HMRC).
PRICING
The average house price rose to £289,707 in November, a 3.3% year-on-year increase (ONS). This is the strongest annual rate of growth since February 2023. Pricing correctly
still remains key, a recent poll of agents suggested that 62% of offers are currently being accepted up to 5% below asking price, with a further 22% over 5% below asking prices**.
HOUSEBUILDING
Just over 225,000 new homes were built in the year to the end of Q4 2024. Although completions rose 10% quarter on quarter, they are still 6% lower than in the year to Q4 2023 and the rate of housebuilding has a long way to go to meet targets (MHCLG). The Home Builders Federation says that to meet the government’s target of building 370,000 homes annually, approvals must increase by over 150%.
PRIME MARKETS
In the prime market, the average price of a property is £1,163,705, having moderated slightly by -7.6% year-on-year, however Scotland is showing positive annual growth of 4%. In 2023, there was a particularly strong presence of cash buyers, 34% of property sales in England and Wales were for cash, compared to the 28% average over the previous five years. However, in 2024, as mortgage rates began to decrease and affordability improved, the trend largely reversed. Mortgages accounted for a higher proportion of sales, while cash purchases fell to 31%, returning closer to the typical status quo. With further interest rate falls expected in 2025 and resulting improvements to affordability, mortgages should continue to account for an increased proportion of sales. A greater range of active buyers, should help drive the modest uplift in prices that is anticipated this year***.
*Dataloft by PriceHubble, HM Treasury Consensus Jan 2025, **Dataloft by PriceHubble poll of subscribers, *** Dataloft by PriceHubble, Land Registry HPI
£ 5 5 0 ,0 0 0
£ 7 7 8 ,5 1 8
+ 4 %
£ 3 5 9
£ 5 1 8 ,0 0 0
£ 7 0 5 ,2 3 9
-2 .3 %
£ 3 6 9
£ 5 7 2 ,0 0 0
£ 7 5 2 ,3 8 0
-2 .8 %
£ 3 8 1
£ 4 7 0 ,0 0 0
£ 6 0 6 ,0 9 6
-4 .7 %
£ 3 2 9
£ 7 3 8 ,0 0 0
£ 9 9 2 ,0 9 6
-5 .8 %
£ 4 8 6
£ 9 1 9 ,0 0 0
£ 1 ,2 8 7 ,3 0 9
-8 .9 %
£ 5 6 9
£ 4 1 1 ,0 0 0
£ 5 4 6 ,9 0 1 -1 .5 %
£ 2 9 5
£ 4 9 9 ,0 0 0
£ 6 6 4 ,4 5 2
-4 .6 %
£ 3 4 8
£ 5 2 1 ,0 0 0
£ 6 8 9 ,4 9 7
-1 .3 %
£ 3 3 8
£ 7 8 9 ,0 0 0
£ 1 ,0 7 0 ,1 9 8
-4 .9 %
£ 5 3 0
£ 1 ,5 4 0 ,0 0 0
£ 2 ,4 6 8 ,5 3 2
-1 3 .2 %
£ 1 ,2 0 6
£273,060
£797,000
£1,163,705
£228,475 £734,000 £1,118,016
£219,373 £674,000
£1,036,883
£269,404
£650,000
£891,167
£429,535
£1,050,000
£1,517,463
£283,503 £806,000 £1,173,309