House Prices going into 2025

[Twiglets1]

We often refer to House Price Indexes (HPIs) in discussions re house prices but there are several out there so which to use?

If you want to know average asking prices use the Rightmove HPI and the price will be for the entire-market in England & Wales.

If you want to know average selling prices it's either the Halifax or Nationwide HPIs but they only have data on buyers who have mortgages approved with them in the UK, so cash buyers for example will be excluded.

The Office for National Statistics HPI is arguably the most accurate as it publishes sold prices on all transactions in the UK (mortgages & cash). However, there is a delay so the data is at least a couple of months behind.

Anacdata HPI also covers mortgage & cash transactions and is the first to report regional monthly selling prices, but only covers England & Wales.

True but in my experience it's quite hard to find a 3 bed house with 3 good sized rooms - the 3rd very often seems to be a box room.

And a lot of people do at least some working from home these days even if they have to go into the office a couple of days a week.

There will always be a demand for more space though obviously people can only afford what they can afford & I agree they are likely to be less aspirational when worrying about COL.

@ Twiglets
We had a 3 double bedroom detached house in the S/E.
It obviously changes from place to place, but also on the age (era) of the housing stock. Ours was a late 60’s Sunley home in mid Sussex, many examples built in that area, still going strong and popular with families especially those commuting.

Is the baby bust /low birth rate going to have a knock on effect? A lot of the chatter around the low birth rate wasn’t people deciding to have no children, but the rise of “one and done” being much more normal. The push for 4 bed houses does seem to be based on the norm being 2 children plus a spare/home office space. One child families will lower that demand.

I suppose potentially, but I think demand is so high there are always people willing to borrow all the money. I have friends who are maxing themselves out on a mortgage to get a bigger place at the moment. I think it will most likely work out for them, although it isn't what I would choose as I'm more risk adverse.

My household falls into the category of not borrowing all the money offered. First time round we were offered 2.5x dh's income plus my income by a building society and over double that by a high st bank. We took the first mortgage. Second time round (this year) we could have borrowed double what we did again. But just because the bank says we can afford it I don't think it means we can, it would make for a very tight and miserable budget for the rest of our life if we had borrowed that much money, and what use would we have had with two extra bedrooms anyway?

We are a one and done family as mentioned by @FancyBiscuitsLevel .

Fair enough.

The 3 beds I've seen tend to be semis or terraced houses where the 3rd bedroom is a single but as you say, it's bound to vary a bit depending on the era of the housing stock.

I’m only going off gut, news articles and a keen interest in Rightmove (ok, I’m obsessed!). And I think, in the South East, there’ll be a small steady increase in house prices over the next three years. Nothing like what we’ve seen in the past two decades but I don’t think they’ll go down.

Renovation costs are pushing people to upsize instead of develop.

However, I think big houses will continue to struggle. Most families in my area have a max of 2 kids; often 1. The school places are getting smaller and people just won’t need 4/5/6 bedrooms anymore. If people are reducing the number of kids they have due to finances, then I think it follows suit that they won’t want to invest in unnecessarily large homes.

I still think, long term (8+yrs), property is a sound investment and house prices will reflect this.

Where I live, the houses that have really struggled are new builds. They are selling at significantly lower values compared with previous years. I think people are finally realising that a tiny downstairs isn’t worth the extra en-suites. And the pocket size gardens give zero potential to extend in the future.

Im not convinced there’ll be a recession, instead I think growth will remain very slow.

Conversely @WidgetDigit2022 I think the COL won’t improve, neither will the cost of heating and maintenance. With the move to ASHP, it will be the new build EPC A & B that become more desirable. People won’t want to buy an old house then punt £100k on an extension while paying through the nose for heating.

Locally to me, there are lots and lots of reductions (midlands)

A friend is selling her late mums bungalow, and it's gone from asking price of £400k to £300k in 6 months

The new builds built over the past few years are standing empty, being reduced, and building on the sites has stopped

The very few appropriately priced houses that come on the market sell very quickly...my cousin just sold hers in 2 days

Even the larger barn conversion type houses that have been on the market for 4+ years with no reduction are now being reduced

Obviously, it will depend on where you live, but it's stagnant here

I don't forsee interest rates getting significantly lower this year, and unemployment rates will rise

Unless you live in a very desirable area to folk with hard cash it's going to be difficult to sell

Data out today states that a third of all sales fell through last year, which is horrendous

It’ll be interesting to see! I don’t think new builds represent good value for money at all!

Neither do I. I agree with what you said about the tiny downstairs, pocket size gardens & zero potential to extend in the future.

@destiel00 Data out today states that a third of all sales fell through last year, which is horrendous.

I assume you are referring to the data from Quick Move Now which found that 28.8% of residential property sales failed to complete in 2024.

To put that percentage into context, however, it's useful to look at the data Quick Move Now published for previous years as it has always been quite common for house sales to fall through.

2024: 28.8% sales fell through over 12 months
2023: 35.1% sales fell through over 12 months
2022: 35.3% sales fell through over 12 months
2021: 30% sales fell through over 12 months
2020: 43% sales fell through over 12 months (high percentage blamed on pandemic uncertainty)

https://www.quickmovenow.com/media-centre/property-sale-fall-through-indexes

Quick Move Now says overall 29% of sales fell through last year, which is lower than some years and within the range of 18% to 40% of fall-throughs that agents often experience.

https://thenegotiator.co.uk/news/uk-housing-market-news/surveys-caused-most-sales-fall-throughs-during-2024/

I agree with what you said about some people always deciding to max out. That is why I said it's more likely overall that events outside their control will take over (recession, job losses, collapse of financial markets, collapse of the £, etc). I'm less confident that your friends who are 'maxing out' will all be okay. I guess it depends on how this plays out and whether they keep their jobs over the years!

It's also true that far more people are choosing not to have children or sticking with just one, which was previously quite unusual. This and the cost of everything places downward pressure on bigger homes. I think demographics over the next 5-10 years and ongoing does that too. Very few people can afford the boomer's houses at current prices. So even if we don't get a significant economic downturn, I can't prices going up in real terms and very likely slowly downwards.

I've seen quite a few more reductions around here since the famous Boxing Day bounce. Some are small (3% or so) but I have seen a few at 8-10%+. We'll see if that's enough or not.

House prices fall for first time in nine months

House prices fell for the first time in nine months as many buyers struggle to afford a mortgage in the face of higher interest rates, a closely watched survey showed. Property values slipped by 0.2% in December, meaning the typical home increased in value by 3.3% during 2024, according to the Halifax house price index. The average home was worth £297,166 by the end of the year, down slightly from the record high hit in November.

It comes as traders reduced bets on the Bank of England cutting interest rates this year, amid signs that inflation remains persistent in Britain. Money markets indicate there will be just two quarter point falls this year to 4.25%, pushing mortgage rates higher.

Amanda Bryden of Halifax said: “The housing market was broadly steady at the start of 2024, with house price growth taking off from the summer onwards.
“In the latter half of the year, house prices grew in response to the falls in mortgage rates, alongside income growth, both leading to financial pressures somewhat easing for buyers.”

She said the housing market has been supported in recent months by falling mortgage rates, income growth and the announcement on upcoming Stamp Duty policy changes. However she warned that mortgage affordability “will remain a challenge for many, especially as the Bank Rate is likely to come down more slowly than previously predicted”.

https://www.telegraph.co.uk/business/2025/01/07/ftse-100-markets-latest-news-house-prices-consumer-spending/

Nations and regions house prices

Northern Ireland maintains the strongest property price growth of any nation or region in the UK, rising by +7.4% on an annual basis in December. Properties in Northern Ireland now cost an average of £205,895.

House prices in Wales were up +4.6% compared to the previous year, with properties now costing an average of £226,646.

Scotland saw a lower rise in house prices compared to the rest of the UK, with properties in the country now £209,959, +2.4% more than the year before.

In England, house prices in the North West were up +5.3% compared to the previous year, with properties now costing an average £238,832 – the strongest growth of any English region.

London retains the highest average house price in the UK, at £547,614, up +3.3% compared to last year.

https://www.halifax.co.uk/assets/pdf/december-2024-halifax-house-price-index.pdf

https://www.standard.co.uk/homesandproperty/property-news/property-values-prime-central-london-b1202002.html

I thought the recent article above looking at Savils research on Prime Central London property - basically down 20% since 2014 and predicted to fall a further 4% in 2025 interesting. Its mostly about drop in international investors specifically in Knightsbridge, Belgravia & South Ken.....cant say I am disappointed at the loss of international investors from the London market or that they got stung.....I wonder if this has impacted the rest of central London property or is this all in its own little bubble?

The article also speculates that affluent up-sizers from central London will look to expensive outer suburbs / home counties due to impact of VAT on school fees.

Acadata house price index December 2024

• Prices still negative but market is turning
• Activity will be boosted by Stamp Duty changes in England
• Southern England yet to flourish

Richard Sexton, Director at e.surv, comments: “Our data shows house prices in England and Wales closed the year at £357,400, representing a modest month-on-month increase of 0.2%. While values remain approximately 2% lower than a year ago and 6% below their late-2022 peak, the broader picture is one of a market exceeding expectations in terms of activity, mortgage lending, and transaction volumes.

“This year-end performance reflects the stabilising effects of improving consumer confidence and a market that has adjusted to economic challenges. The Chancellor’s announcement on Stamp Duty changes is anticipated to drive a busier start to 2025, as buyers bring forward purchases to avoid the additional SDLT charges from April. However, regional disparities continue to shape the overall picture. Annual price falls for England and Wales stands at -2.0%, but when London and the South East are excluded, the decline narrows to -1.2%, highlighting contrasting regional market dynamics.

“Looking ahead, attention will turn to the government’s forthcoming long-term housing plan, which is expected to address affordability challenges and increase housing supply. While the advent of new stock is still some way off, the very clear direction of travel will give buyers cause for optimism in the longer run. “The housing market in 2024 demonstrated its resilience, and there is cautious optimism for further stability and growth in the year ahead.”

About the e.surv Acadata House Price Index
The index is based on the actual prices at which residential properties in England and Wales are transacted, including prices for properties bought with cash. Based upon HM Land Registry reporting, such data typically represents the vast majority of all relevant transactions. As such, our figures stand out from those based on mortgage-based sales only, asking prices or prices based upon smaller samples.

https://www.acadata.co.uk//assets/uploads/2025/01/e.surv-Acadata-England-Wales-HPI-December-2024.pdf

Taken from the same article:

House prices in England and Wales continue to be rather subdued compared with Scotland and Northern Ireland.

Only northern England was actually in positive territory in November 2024. For the same period, middle England and Wales were in limbo, whilst the regions of southern England continued to see annual prices retreating (if more slowly than a year earlier). The more subdued nature of southern markets probably reflects the more intense affordability pressures and the greater reliance on and sensitivity to the costs of mortgage finance.

Whatever the underlying reasons, weaker prices in southern England and not least in London are a key reason for the overall weakness in our headline England and Wales figures. The headline 2.0% year-on-year decrease in house prices seen across England and Wales in December would shrink to 1.2% if we exclude London and the South East.

https://www.telegraph.co.uk/money/property/house-prices/150k-wiped-off-house-prices-as-appeal-for-home-counties-wea/#comment

Homeowners in Britain’s Home Counties are being forced to accept £150,000 under the asking price in a sign that the post-pandemic property boom is over.
The slowdown in Kent was most severe, with houses selling for 9.7pc less than they were listed for – a reduction of £156,344.
It was also the county with the slowest market, as houses took an average of 121 days to sell. This was followed by Berkshire, where sales took 106 days.
Homeowners in Hertfordshire took the smallest hit, going for £133,333 less than asking.

As we've discussed, the more expensive properties in the South are taking a large hit. I can see the reductions getting larger rather than smaller.

150k off the asking price sounds a lot but the fact it represents just under 10% is not as startling as the amount first seems.

It’s not unusual for houses to sell at 5-10% under asking in a buyers market, especially with more expensive properties in the South. It’s often discussed on this site that EAs routinely overvalue “just to see” (win the business) so not that surprising that big reductions are common with expensive properties.

If they can't afford VAT on school fees I'm not sure I'd call them affluent!

Sadly in my part of zone 2 prices keep rising.

I missed the post by @Tikityboo earlier but I do think the prime central London market is somewhat unique. Both on how much prices increased due to investment from overseas and how much property prices subsequently fell as a result of this investment drying up.

We sold my Dads flat in Marylebone in 2022. Had about 30 viewings and they were ALL from international buyers. The price achieved was certainly less than it would have got a few years earlier…. More than we would probably get today I expect.

Nationwide January HPI

• Annual rate of house price growth slowed to 4.1% in January, compared with 4.7% in December
• House prices up 0.1% month on month
• Little change in overall rate of home ownership in recent years despite affordability pressures

Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, said “The housing market continues to show resilience despite ongoing affordability pressures. As we highlighted in our recent affordability report, while there has been a modest improvement over the last year, affordability remains stretched by historic standards. A prospective buyer earning the average UK income and buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 36% of their take-home pay – well above the long-run average of 30%

“Furthermore, house prices remain high relative to average earnings, with the first-time buyer house price to earnings ratio standing at 5.0 at the end of 2024, still well above the long run average of 3.9. Consequently, the deposit hurdle remains high. This is a challenge that has been made worse by the record increase in rents in recent years, which, together with the cost-of-living crisis more generally, has hampered the ability of many in the private rented sector to save.

“Therefore, it’s not surprising that a significant proportion of first-time buyers have to draw on help from friends and family to raise a deposit. In 2023/24, around 40% of first-time buyers had some assistance raising a deposit, either in the form of a gift or loan from family or friends, or through an inheritance.

“Despite these challenges, there has been relatively little change in overall levels of home ownership in recent years. The latest English Housing Survey produced by the Ministry of Housing, Communities & Local Government (MHCLG) showed homeownership rate remained stable in 2024 at 65%.

https://www.nationwidehousepriceindex.co.uk/reports/house-price-growth-softens-at-the-start-of-2025

Halifax HPI January 2025

• House prices increased by +0.7% in January following dip of -0.2% in December
• Average property price of £299,138 is a new record high
• Annual growth eased slightly to +3.0% (vs +3.4% previous month)
• Northern Ireland maintains the strongest UK annual house price growth

Nations and regions house prices
The rate of annual property price inflation slowed in two thirds of the UK’s nations and regions at the start of the year.
Northern Ireland continues to have the strongest annual property annual price growth in the UK, though at +5.9% in January this eased considerably compared to December (+7.3%). Properties in Northern Ireland now cost an average of £205,473.
House prices in Wales were up +3.6% compared to the previous year, with properties now costing an average of £227,397.
Scotland once again saw a lower rise in house prices compared to the rest of the UK, with properties in the country now worth an average of £210,690, +2.4% more than the year before.
In England, the North East has overtaken the North West as the region with the strongest annual property price growth, up +5.2% compared to the previous year, with properties now costing an average £178,696. This is the first time since September 2023 that the North West has not topped the table of English regions for annual growth. London retains the highest average house price in the UK, at £548,288, up +2.8% compared to last year.

https://www.halifax.co.uk/assets/pdf/january-2025-halifax-house-price-index.pdf

Taken from the same report, Amanda Bryden, Head of Mortgages, Halifax, said:

"Affordability is still a challenge for many would-be buyers, but the market's resilience is noteworthy. There’s strong demand for new mortgages and growth in lending. With a stamp duty increase looming, some of this demand may have come from first-time buyers eager to complete transactions before the end of March.
"Despite geopolitical uncertainties, and waning consumer confidence, other key indicators look fairly positive for the housing market. The Bank of England has made its first base rate cut of the year, and there are probably more to come. Household earnings are expected to continue outpacing inflation – albeit that gap may narrow – easing some of the financial pressure still being felt from the cost-ofliving squeeze.
"As things stand, mortgage rates are likely to hover between 4% and 5% in 2025, influenced by both global financial markets and domestic monetary policy. Over the past year, buyers have been getting used to this new normal, understanding that rates are unlikely to return to the historical lows of 1%.
"But the fundamental issue in the housing market remains the lack of supply. This long-term trend, coupled with a gradual improvement in affordability, should support further modest house price growth this year"