UK house prices fell for the first time in nine months in December 2024, marking a shift in the housing market after five consecutive months of growth. According to data from Halifax, the average price of a home dropped by 0.2% from November, bringing the average cost to £297,166. On an annual basis, however, prices were still up by 3.3%, albeit down from the 4.7% growth seen in November.
Regional Variations
The regional housing markets showed a variety of trends. Northern Ireland posted the highest annual growth, with prices increasing by 7.4% to an average of £205,895. In Wales, house prices were up by 4.6% year-on-year, with an average price of £226,646. Meanwhile, Scotland experienced more modest growth of 2.4%, with an average house price of £209,959.
In London, which consistently maintains the highest house prices in the UK, the average property cost £547,614, marking a 3.3% increase from the previous year.
Market Outlook and Stamp Duty Changes
The UK housing market showed signs of stabilization toward the end of 2024, following a period of growth during the summer months. Amanda Bryden, from Halifax, explained that house prices increased in response to falling mortgage rates and income growth, which eased some financial pressures for buyers.
Looking forward to 2025, changes to stamp duty, set to take effect in April, are expected to play a significant role in the market. The nil-rate band for first-time buyers will decrease from £425,000 to £300,000, providing a fresh incentive for those looking to purchase homes.
However, these changes will have varying impacts by region. In London, only 8% of homes for sale will be stamp-duty free for first-time buyers after April. In contrast, 24% will be stamp-duty free in the South-East, and 32% in the East of England.
Predictions for 2025
Looking ahead, Bryden anticipated that mortgage affordability will remain a challenge for many buyers, especially if the Bank of England base rate decreases at a slower pace than expected. However, assuming employment conditions remain stable, buyer demand is expected to hold up relatively well, with modest house price growth forecasted for 2025.
Matt Thompson, head of sales at Chestertons, noted that December 2024 saw one of the busiest Decembers in years, with a surge in demand from first-time buyers eager to beat the stamp duty changes. He also highlighted the growing demand from second-steppers, particularly young families looking to upsize.
Ashley Webb, UK economist at Capital Economics, also weighed in on the market, stating that despite the 0.2% fall in the Halifax index, the Nationwide measure showed a 0.7% increase in house prices during the same month. Webb explained that while recent mortgage rate rises have weighed on the housing market, his firm still expects house prices to rise by 3.5% in 2025, outperforming the consensus forecast of 2.5-3.0%.
Conclusion
Despite the recent dip in prices, the outlook for the UK housing market in 2025 remains relatively optimistic, with continued buyer demand, particularly driven by first-time buyers and families looking to upsize. Changes in stamp duty and the expectation of falling mortgage rates will play pivotal roles in shaping the market in the year ahead.
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