House prices are close to record levels, but experts warn of potential volatility due to upcoming stamp duty changes in 2025
London: House prices wrapped up the year on a high note, just shy of an all-time record. An index showed a solid increase, but experts are raising eyebrows about potential volatility ahead.
In December, house prices jumped by 4.7% compared to the previous year, up from 3.7% in November. The average price hit £269,426, which is pretty impressive.
Robert Gardner, the chief economist at Nationwide, noted that prices are still below the peak from summer 2022, which was £273,751. He mentioned that despite ongoing affordability issues, the market has shown surprising resilience.
At the start of the year, prices were still high compared to average earnings, making it tough for first-time buyers to save for a deposit. Rental prices have also skyrocketed, adding to the struggle.
For those who managed to save, monthly mortgage payments were still a challenge. Rates were around 4.5% for a typical mortgage with a 25% deposit, which is a far cry from the 1.5% rates back in late 2021.
Despite these hurdles, the housing market saw more activity in 2024, with mortgage approvals rising above pre-pandemic levels by year-end.
Looking ahead, Gardner warned that changes to stamp duty in April could stir things up. Buyers might rush to make purchases to dodge the extra tax, which could lead to a spike in transactions early in 2025.
He expects a busy March, followed by a slowdown in the months after. This could make it tricky to gauge the market’s true strength.
As long as the economy keeps improving, Gardner believes housing activity will gradually pick up as affordability issues ease with lower interest rates and rising earnings.
He also pointed out a noticeable divide in house price performance across England. The North East, North West, Yorkshire and the Midlands saw better growth compared to the South, which lagged behind.
Northern Ireland topped the charts with a 7.1% increase, while Scotland and Wales also saw decent growth. Terraced houses led the price rise, with flats bouncing back nicely too.
Sarah Coles from Hargreaves Lansdown likened the property price surge to an unexpected salad at a party, thanks to the looming end of the stamp duty holiday.
As we move into 2025, the urgency to buy before April might ease, leading to a more balanced market, according to Nicky Stevenson from Fine & Country.
Experts are keeping a close eye on how the stamp duty changes will affect the market, but they remain hopeful that the economy’s recovery will help mitigate any negative impacts.
Jeremy Leaf, a north London estate agent, noted that while cheaper properties are seeing stronger prices, there’s more choice now, which is helping balance supply and demand.
He mentioned that the post-holiday market is quieter than usual, with buyers and sellers adjusting to the new normal. Interest rates are expected to stay high for a while, but wage growth is outpacing inflation.
Overall, it looks like the housing market is in for an interesting year ahead, with plenty of factors at play.
