With income outpacing inflation for the second year in a row, it is encouraging those who were considering relocating to take the plunge. Experts have predicted a “buyer’s market” for house hunters in the year ahead, giving them greater negotiating power as the mood of the housing market shifts to “cautious optimism”.
Rightmove recorded its busiest Boxing Day for new seller activity, with a record number of properties listed for sale by agents. Total buyer demand, measured by the number of inquiries sent to estate agents about homes for sale, was also 20% higher on 26 December than the same day in 2023, as potential buyers capitalised on more choice before a 2025 move.
However, even the more hopeful expectations for 2025 were met with caution, as an important stamp duty relief for first-time buyers was scheduled to end in the spring, as well as potentially high interest rates and taxes bearing down on the market.
In addition to this, Knight Frank have stated there is a lag in mortgage agreements due to house price growth being out of step with mortgage rates.
A Knight Frank spokesman said: “There are two reasons why house prices are currently out of sync. First, a number of buyers are sitting on sub-4% mortgage offers made before the Chancellor announced her economic plans on 30 October. Agreements are valid for up to six months, which means some will be insulated from the increase in borrowing costs triggered by the Budget.”
He added: “The other factor supporting house prices is an imminent change to the rate of stamp duty. The nil rate band for stamp duty reverts to £125,000 from £250,000 in April, which means bills will rise by up to £2,500. A similar reversion means up to £6,250 in additional stamp duty for first-time buyers.”
Despite this, Aneisha Beveridge, head of research at the property company Hamptons, said: “As the end of 2024 approaches, the mood of the housing market has shifted from trepidation to cautious optimism. Lower mortgage rates have been the principal catalyst for change, falling much more rapidly than we had expected. House prices are moving upwards, reversing the declines of 2023. Yet, while the future direction of interest rates seems to have been mapped out, the pace of this journey and its ultimate destination remain uncertain.”
Hamptons forecast house prices to rise by 3% across Britain in 2025, followed by 3.5% in 2026 and 2.5% in 2027 as the “affordability picture” improves.
The new year could also mark the beginning of a “new housing cycle, when London starts to outperform the rest of the country”, as Hamptons’ housing market forecast predicts 4% price growth in London in the fourth quarter of 2025, outpacing the other regions for the first time since 2015.
Tim Bannister, a property expert at Rightmove, said this would be “driven partly by some major companies mandating a return to permanent office working. We think 2025 will continue to be a buyer’s market, which could provide buyers with more negotiating power, given the number of available properties per estate agent is at a decade-high for this time of year. There’s less competition amongst buyers than during the pandemic markets, which could provide them with some breathing room to choose the right home at the right price.”
However, there is a chance that the changes to stamp duty coming into effect in April could cause a potential rush in transactions, therefore distorting the market. Hamptons have stated that overall, affordability is expected to remain the key determinant of the market’s direction.
Sources: The Guardian, Great British Life, Property Wire