UK House Price Trends and Predictions for 2025

Current Market Overview

As of January 2025, the average house price in the UK stands at £267,200, reflecting a 1.9% increase over the past year. The market has remained relatively stable, with signs of continued resilience despite economic uncertainties.

Regional Variations

House prices across the UK continue to show significant regional variations, further highlighting the long-standing north-south divide.

• Northern Ireland: House prices are up by 7.2%, making it one of the fastest-growing regions.
• North West: Prices have risen by 3%, showing strong growth.
• London & Southern England: More modest growth of 1% to 1.2% over the last year.

Looking ahead, Savills forecasts continued growth, predicting:

• 5% price increases in the North West, North East, Scotland, and Yorkshire & the Humber.
• 2.5% increases in the East of England and the South West.

These discrepancies reinforce the trend of stronger price growth in more affordable regions compared to the pricier South.

Impact of Stamp Duty Changes

From April 2025, stamp duty thresholds will be revised, with significant implications for buyers:

• The regular threshold will drop to £125,000 (currently £250,000).
• First-time buyers’ stamp duty threshold will decrease to £300,000 (currently £425,000).

This adjustment is expected to increase costs for buyers, which could slow market growth after April. Many buyers are already rushing to complete purchases ahead of the new rules, potentially leading to a surge in sales before the deadline.

Market Activity and Demand

Despite upcoming tax changes, housing market activity remains strong:

• 10% more sales agreed than last year.
• 11% increase in homes for sale.
• A boost in consumer confidence and spending, fueling demand.

Strong earnings growth and steady job market conditions have helped sustain this momentum.

Mortgage Market and Interest Rates

After rising throughout late 2024, mortgage rates are showing signs of relief:

• Bank of England cut interest rates to 4.5% in February 2025.
• Some fixed-rate mortgages have dipped below 4% for the first time in months.

Lower mortgage rates are expected to support buyer demand; however, the Bank of England’s cautious stance on further rate cuts may put pressure on borrowing costs in the long run.

Supply and Demand Dynamics

The UK housing market is currently seeing an imbalance in supply and demand, particularly when comparing houses and flats:

• Flat supply: Increased by 14%, but demand has only risen by 1%.
• House demand: Increased by 16%, but supply has only grown by 5%.

This disparity accounts for the slower growth in flat prices, which have increased by just 0.5% in the last year, while house prices have grown by 2.2%.

Forecast for 2025

Experts anticipate continued house price growth in the coming year, though at a more moderate pace:

• Knight Frank: Forecasts a 2.5% increase.
• Savills: Predicts a <