UK house prices see notable surge, reaching a three-year high due to the rush of homebuyers seeking to beat the stamp duty deadline
Housing Market Frenzy in 2025: A Year of Expectations and Uncertainties
The housing market is off to a roaring start in 2025 as buyers race to secure deals before changes to stamp duty thresholds kick in. According to Zoopla's January House Price Index, new sales agreements soared by 12% year-over-year, and buyer demand increased by a staggering 13%. These figures follow Zoopla's December report, where they announced a 2% increase in house prices compared to the previous year, to an average of £267,700.
First-time buyers are driving this demand, with an increase of more than 33% in the number of first-timers looking to get on the property ladder. An enticing offer awaits those who beat the stamp duty deadline - until the end of March, first-time buyers won't pay any stamp duty on properties up to £425,000, while home-movers are currently exempt up to £250,000. However, come April, these thresholds will drop to £300,000 and £125,000 respectively, a change that could add thousands to the cost of a home purchase.
Zoopla warned that it's too late to complete a property purchase by the end of March and benefit from the lower stamp duty rates. Despite this, the research indicates that demand in the market will remain strong. A survey showed that 22% of current renters and 17% of homeowners are planning to buy within the next two years.
Richard Donnell, executive director at Zoopla, is optimistic about the market's prospects for the rest of the year. "The first few weeks of each year tend to provide a clear indication of how the rest of the year is likely to unfold. 2025 has started well, better than 2024 and 2023, which bodes well for market activity over the rest of the year, supported by evidence of more people looking to move," he said.
However, the picture is far from simple. House prices are increasing at different rates across the country. The fastest growth was in Northern Ireland, up 7.7%, followed by a 3.2% rise in the North West of England. This is partly due to rising wages, but Southern England is seeing slower growth, as the average price of properties is already high, and it's taking longer for wages to sustainably improve housing affordability.
Analysts and estate agencies have mixed opinions about what will happen to house prices for the rest of 2025. While some expect modest growth, others predict more significant rises, and some caution of potential pressures from inflation and changing economic conditions.
Knight Frank, for instance, recently downgraded its house price growth predictions, predicting a 2.5% increase for 2025, down from formerly expected 3-5% growth rates. However, they still expect prices to rise by 3% in 2026 and 3.5% in 2027.
Tom Bill, head of UK residential research at Knight Frank, noted that "Demand in the UK housing market feels artificially high" due to the lower mortgage rates and the impending stamp duty changes. He anticipates a period of downward pressure on house prices as the impact of higher mortgage costs kicks in.
In contrast, Savills is more optimistic, predicting 4% annual growth across the UK in 2025, driven by factors like an expected increase in interest rates and a slower delivery of new homes.
House price growth predictions for 2025 vary among different estate agencies and experts. Knights Frank, for example, has adjusted their forecast for 2025 to a 3.5% growth in house prices, up from their previous prediction of 2.5%. Savills predicts a more modest growth of 4% for 2025, but they also note that the slow delivery of new homes could lead to higher growth rates over the next five years, potentially ranging from 5-7.5% annually. So, while the housing market is expected to see some boost in the first quarter due to the stamp duty rush, the outlook for the rest of the year is uncertain and will depend on a range of economic factors and supply-demand dynamics.
Investors should closely monitor the housing market in 2025, as the initial surge due to the stamp duty deadline may lead to further investing opportunities in the real-estate sector. Financially, the rising demand, coupled with potential growth in house prices, could present attractive prospects for those willing to invest in the property market. However, it's crucial to keep an eye on economic factors like inflation and changing economic conditions, as they could significantly influence the housing-market trend for the rest of the year.
