With a record number of new sellers entering the market since Boxing Day, the UK property market is seeing a notable uptick in activity. A busier and more competitive housing market is anticipated in 2025 due to the increase in sellers, rising property prices, and increased agreed sales. As the new year begins, the UK property market has proven remarkably resilient, with high activity levels suggesting a promising future.
What Caused January's 1.7% Increase in Real Estate Prices?
The average price of a property put up for sale increased by 1.7% in January, or £5,992, to £366,189. Since 2020, this has been the biggest rise in home prices at the start of the year. After a cyclical decline in December, price increases at the beginning of the year are usually anticipated; nonetheless, this month’s surge has been particularly noticeable. The UK property market is seeing favourable conditions, and buyers are reacting to this. A more comfortable bidding climate is being created by lower inflation and possible interest rate reduction.
Rightmove’s monthly report states that “prices typically recover in the new year following a seasonal decline in December, but this year’s increase has been particularly sharp.” According to the research, this spike was caused by purchasers growing more at ease placing bids on homes as mortgage rates started to decline. This pattern is a reaction to recent data that indicates inflation fell more than anticipated in November, to 2.5%, which increases the likelihood of larger interest rate reductions in 2025.
Do Buyers Still Worry About Affordability?
Although property prices have risen, they remain almost £9,000 below the all-time high recorded in May 2024. This is mostly because affordability issues still restrict some buyers’ capacity to buy homes. Despite this, the market has exhibited signs of vigour, as seen by the 11% increase in new properties compared to last year. Since Boxing Day, there has been an 11% increase in agreed sales and a 9% increase in the number of purchasers contacting agents about available properties.
How Do Sellers Face Competition in a Congested Market?
Due to the increasing rivalry among sellers, the number of properties posted for sale for each estate agency branch has climbed to its highest level in ten years for this time of year. With many sellers hoping to draw in buyers in the New Year, this trend will probably continue in the coming months. Because the UK housing market is so competitive, sellers must use strategy to differentiate themselves.
“New sellers have started the year with a bang,” said a property expert at Rightmove. “We’ve also seen a strong start to the year in new seller asking prices. However, given the higher-than-anticipated seller competition, we would expect this to slow down over the next few months.”
What Is Rightmove's 2025 Housing Market Forecast for the UK?
With 1.15 million sales and a 4% increase in the average asking price, Rightmove is projecting a higher volume of transactions in 2025. Significant uncertainties still exist, though, and they could impact the market. Among these are the rate and scope of the Bank of England’s interest rate reductions. The anticipated modifications to stamp duty, scheduled to go into effect on April 1, 2025, are another important consideration. Smaller properties, usually bought by first-time purchasers, are anticipated to be impacted by these changes.
What Impact Will Stamp Duty Changes Have on First-Time Purchasers?
The tax-free stamp duty threshold will drop to £300,000 starting in April 2025, which will probably impact first-time purchasers in more affluent locations. First-time purchasers in less expensive areas of England will mostly remain untouched, but those who buy properties beyond the threshold will have to pay more in stamp duty, which might reduce their purchasing power. These changes may significantly impact the market unless more assistance is provided for first-time purchasers. The effects of these changes in the UK housing market will be critical for newcomers to the real estate market.
According to Rightmove, “a drop in the tax-free threshold will largely not affect first-time buyers in cheaper parts of England.” However, stamp duty fees will increase for anyone purchasing properties over the threshold, particularly in more affluent neighbourhoods.
What Impact Do Mortgage Rates Have on the Demand for Housing?
Fixed-rate mortgage offers below 4% have vanished recently, and mortgage rates are still relatively high. According to Rightmove’s weekly mortgage tracker, the average five-year fixed mortgage rate is currently 4.75%, which is lower than the 4.78% from the previous year. Although it has dropped to 4.97%, the average two-year fixed mortgage rate is still slightly lower than the 5.08% rate observed in 2024. These mortgage rate conditions are significantly shaping the dynamics of the UK housing market.
Interest rate forecasts have changed as financial markets respond to the recent decline in UK inflation and the country’s sluggish November economic growth. Two or three quarter-point rate cuts in 2025 are priced into financial markets. These projections could alter, though, especially in light of the recent volatility in the UK and other government bonds.
In the upcoming months, would there be pressure on the demand for housing?
In the upcoming months, rising borrowing prices may continue to affect mortgages, which might pressure demand for homes. The Bank of England’s interest rate reductions and changes in the bond market will significantly impact demand. Any changes in these locations will substantially impact house prices in the UK. The direction of these elements will dramatically impact future developments in the UK housing market.
In 2025, what can we anticipate from the housing market?
Although 2025 has seen a solid start for the UK housing industry, several aspects remain unknown. The housing scene will continue to be shaped by changes in interest rates, the effects of stamp duty adjustments, and evolving market dynamics following more significant economic upheavals. Both buyers and sellers will need to maintain their flexibility as they negotiate what may be a hectic yet uncertain year. The UK housing market will probably continue to be dynamic, with many participants’ decisions being influenced by significant developments.
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