Market report January 2025: Blue skies ahead?

Property market analysts are cautiously optimistic about house price growth at the start of the new year. However, affordability concerns could restrain growth in the rental market.

• Halifax says that UK house prices fell by 0.2% from November to December, the first monthly drop since March. However, prices were still up by 3.3% year on year, taking the average to £297,166.

• Zoopla’s figures for November show slower year-on-year growth of 1.9%. However, the platform says that it currently has the most in-progress sales for four years, with 283,000 properties currently in the pipeline. They predict further increases in activity this year, driving price growth of 2.5% in 2025.  

• Meanwhile, Hamptons predicts 3% growth in 2025, including a return to nation-leading growth in London. And Rightmove reported its busiest Boxing Day ever for new listings.

• Not everyone is convinced that strong demand will hold. Robert Gardner, Chief Economist at Nationwide, says that first-time buyers are trying to get in ahead of the Stamp Duty increase on 1 April, and expects sales to fall off after that. However, he still predicts price growth between 2 and 4% in 2025.

• Knight Frank’s head of UK residential research, Tom Bill, has a more pessimistic take. He says that the housing market is currently outperforming the UK economy due to the Stamp Duty deadline and current buyers are still enjoying lower pre-Budget interest rates. Accordingly, Bill expects the market to weaken from April.

• But overall, agents are feeling fairly positive. A survey from GetAgent found that 76% expect the sales market recovery to continue this year, while 64% expect an increase in sales volume compared to 2024.

• The Office for National Statistics reports that rental growth has dipped slightly, but remains strong. Their Price Index of Private Rents found a 9% year-on-year increase in December, down from 9.1% in November, with rental inflation being highest in London. Average rents stood at £1,369 in England, £991 in Scotland and £777 in Wales.

• Could rents hit an affordability ceiling this year? Landlord and tenant services provider Canopy says the average tenant spent 35.7% of their income on rent in 2024, and 1 in 5 spent over half.

• A shortage of housing is putting upward pressure on house prices and rents, and that looks set to continue in 2025. Construction growth fell to its lowest level in six months in December, according to S&P Global, while the Home Builders Federation recorded just 2,260 housebuilding sites were approved between July and September. Forecasters expect more housebuilding in 2025 than in 2024, but think it will still fall well short of the government’s 370,000-home target.