House price inflation is losing momentum as seasonal factors and growing economic uncertainty cools buyer demand, while supply continues to expand, according to the latest index from Zoopla, who says more homes for sale are boosting choice and keeping house prices in check.
UK house prices increased by 1.6% in the year to March 2025, up from 0.2% a year ago but down from 1.9% in December 2024.
House price inflation is set to slow further in the coming months, while sales agreed will continue to increase. Zoopla expects lower base rates over 2025 to support market activity. In addition, lenders are starting to adjust how they stress test the affordability of new mortgages, which could boost buying power by 15-20%, supporting demand and sales agreed rather than boosting house prices. Yesterday, NatWest announced changes to its stress tests, mirroring recent moves from HSBC and Lloyds Banking Group.
Buyer demand was running 10% above last year in the early months of 2025, ahead of the end of stamp duty relief in England and Northern Ireland. Demand has cooled in recent weeks and is broadly in line with the levels recorded a year ago. The weakening in buyer demand is partly seasonal, reflecting the Easter holidays, while global events and uncertainty over the economic impact of tariffs are likely to be causing hesitation amongst some buyers. Sales agreed are holding up 6% higher than a year ago.
One area of the market where there is robust growth is in the number of homes for sale. There were 15% more homes listed for sale in the last month compared to a year ago. The average estate agent currently has 34 homes for sale, compared to 31 this time last year and a low of 15 in 2022 during the pandemic boom. Many of these sellers are also buyers, which explains why sales agreed continue to increase.
Zoopla now expects house price growth to slow towards 1% to 1.5% in the coming months, stating that the market remains on track for 5% more sales in 2025 as long as sellers remain realistic on pricing.
North-south divide in house price inflation
House price inflation is starting to slow across all regions and countries of the UK, mirroring the national trend. However, the current rate of price growth remains higher than a year ago across all areas. The number of sales agreed is also higher than a year ago across all areas. Sales agreed are up by double digits in Wales (14%), the North West (10%) and the North East (10%).
House price inflation is still sitting at less than 1% across southern regions of England where affordability pressures are greatest. House prices in these regions are high relative to household incomes, while the recent end of the stamp duty boost has dampened demand. In contrast, prices are rising by 2.2% - 3% across the West Midlands, the Northern regions, Wales and Scotland. Prices are 6% higher in Northern Ireland. House prices are lower in these areas, and buying a home is accessible to a greater number of households.
Uncertainty to temper demand in the short term
Zoopla expects market activity to continue to track in line with 2024 levels. However, ongoing uncertainty around the impact of tariffs on the UK's economy will continue to weigh on demand in the coming weeks.
While UK economic growth is expected to be weaker in 2025, growth in average earnings (5.6%) remains well ahead of general inflation. Current expectations are that the Bank of England may have scope to further lower the UK base rate this year. This would ensure the cost of average fixed rate mortgage remains in the 4-5% range. This points to a general continuation of current housing market trends, with steady growth in sales as more sellers come to the market but with house price inflation remaining in check.
Toby Leek, president of NAEA Propertymark, commented: “Improved two-year mortgage products, greater borrowing power and sustained confidence are all playing key roles in helping raise the number of homes for sale and boost overall momentum within the housing market.
“Alongside the fact that the spring and summer months are proven to be historically busier times of the year, many of those who are waiting in the wings due to riding out current global economic uncertainty and the continued journey in interest rates cooling may be finding it difficult to resist the broad range of properties available coupled with their improved financial status.”
