"While the housing market has been supported in recent months by falling mortgage rates, income growth and the announcement on upcoming stamp duty policy changes, mortgage affordability will remain a challenge for many"
- Amanda Bryden, head of mortgages at Halifax
House prices ended 2024 with annual growth of 3.3% in December, despite seeing a monthly fall of 0.2%, the latest Halifax house price index shows.
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.
House prices in Wales were up 4.6% compared to the previous year, while 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.
Amanda Bryden, head of mortgages at Halifax, said: “UK house prices finished 2024 up 3.3% over the year, with the average house price £297,166. Prices fell back slightly in December, by 0.2%, following five consecutive monthly increases.
“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. Impending changes to stamp duty thresholds have also given prospective first-time buyers even greater motivation to get on the housing ladder and bring any home-buying plans forward. Together, these elements meant mortgage demand picked up, hitting the highest level in over two years and back to levels seen pre-pandemic.
“In many areas across the country, house prices were also buoyed by demand outstripping supply, possibly further amplified by homeowners holding off putting their property on the market – perhaps in anticipation of mortgage rates reducing further.
“Where does that leave the housing market for 2025? While the housing market has been supported in recent months by falling mortgage rates, income growth and the announcement on upcoming stamp duty policy changes, mortgage affordability will remain a challenge for many, especially as the Bank Rate is likely to come down more slowly than previously predicted. However, providing employment conditions don’t deteriorate markedly from a more recent softening, buyer demand should hold up relatively well and, taking all this into account, we’re continuing to anticipate modest house price growth this year.”
Karen Noye, mortgage expert at Quilter, commented: “Despite the challenges it faced throughout 2024, the housing market ended the year looking considerably stronger than many might have anticipated 12 months ago.
“December is typically a quiet month while the festivities take centre stage, and other plans such as moving home are put on the back burner. This was reflected in this morning’s Halifax House Price Index with a slight 0.2% decrease in house prices in December. However, on a quarterly basis prices were still up 1.4%, and on an annual basis, prices rose by a solid 3.3%.
“This annual growth is indicative of a remarkable level of resilience within the housing market. It has battled ongoing headwinds of high borrowing costs and affordability pressures for a long while now, yet demand seems to have been sustained and the market may even now be adjusting to the ‘new normal’ of higher but more stable interest rates.
“2025 will not be without its own fair share of challenges, however, and the changes to stamp duty, which are due to come into effect in April, could weigh heavily. For home movers, the current stamp duty threshold of £250,000 will halve to its previous level of £125,000, meaning the process will become even more costly.
“For first-time buyers, the impact will be keenly felt. Not only will the stamp duty threshold decrease from £425,000 to £300,000, which could mean they go from paying nothing to paying up to £6,250 in stamp duty, but the maximum purchase price first time buyers' relief can be claimed on will fall to £500,000 from the current level of £625,000. This will no doubt make taking the first step onto the property ladder even more challenging, particularly for those living in areas of the country with higher average house prices.
“First-time buyers are a critical element of the housing market, but piling on additional affordability pressures at a time when purchasing a first home is already extremely difficult means we could see a reduction in such purchases. This would not only be disappointing news for those who had hoped to take that first step, but it would also likely ripple across the market and we could see a ‘gluing up’ effect if chains stall and transactions slow as a result.
“In addition, the Bank of England looks unlikely to make any drastic changes to the base rate, so while mortgage rates are expected to ease, it will be only gradually. Nonetheless, the prospect of even slightly lower rates could be enough to help prop up demand for now."
Jonathan Hopper, CEO of Garrington Property Finders, added: “December’s dip in house prices is likely to be little more than a pause for breath before the January bounce.
“Across the property market as a whole, business has been brisk during the first few days of the year. Pent-up demand is beginning to surface and several property portals reported record Boxing Day traffic.
“Activity is especially strong among first-time buyers, many of whom are racing to get into their new home before the stamp duty thresholds change at the end of March.
“This sense of urgency has led some first-timers to view in haste and offer high in order to do a deal quickly and give themselves a fighting chance of completing their purchase before the tax changes take effect.
“But higher up the market, things are proving tougher for sellers. A surge in the number of homes for sale has given buyers an abundance of choice, and with it the leverage to drive a hard bargain.
“In response, many sellers are having to hold down their asking prices or risk having their home sit unsold on the shelf.
“At the same time, most wealthy buyers remain highly price sensitive. With plenty of prime property to choose from, many are prioritising value, taking their time and negotiating hard - all of which is keeping price growth in check.
“With interest rates set to fall during 2025, cheaper mortgages will inject additional momentum to the market. But the pace of price rises is likely to stabilise once the temporary distorting effect of the stamp duty changes is past.”
