UK housing market shows signs of gradual recovery as prices rise

Predictions for 2025 suggest that prices will rise by 2.5% by the end of the year, indicating a gradual recovery in the housing market amidst ongoing economic challenges. Data shows that 2024 was a robust year for property sales, influenced by a rise in the number of homes available and a decrease in mortgage rates. 

Notably, the sales pipeline at the end of 2024 is reportedly the highest it has been in four years, with new sales agreed in the last month of the year increasing by 23% compared to the previous year. This surge in activity is largely attributed to committed buyers and sellers looking to navigate impending changes to stamp duty which will take effect in April 2025.

Despite the upswing in sales volumes, house price growth remains subdued, largely due to affordability issues that constrain buyers. 

The average estate agent reported 6.1 sales per month through 2024, the highest rate since the peak of the pandemic property boom in 2021. The total sales pipeline includes around 283,000 homes worth approximately £104bn, marking a 27% increase in the number of deals compared to last year.

The regional landscape of house price inflation has also shown significant variation. While Northern Ireland leads with a remarkable growth rate of 6.5%, regions like the South East and Eastern England exhibit considerably lower price increases, at 0.7% and 0.8% respectively. The North West and North East report increases of 3.5% and 2.8%, while Scotland and Wales follow closely at 2.6%.

In recent months, buyer sentiment has shifted towards greater price sensitivity, particularly following the Autumn Budget and concerns over the future of mortgage rates. Currently, buyers are negotiating prices that are about 3.6% below the asking price, a slight decline from 3.2% over the summer, maintaining the trend of a buyer’s market amidst ongoing economic uncertainty.

Looking forward, the housing market in 2025 appears poised to navigate continued North-South disparities in price inflation. The expected house price increase of 2.5% is underpinned by a wider economic context, with household incomes having grown significantly since 2010 - providing a clearer path for house prices to rise in regions where they have previously lagged behind income growth.

With anticipated housing sales projected to reach approximately 1.15 million in 2025, up from 1.1 million in 2024, the market seems set for a cautious but promising upward movement, provided external economic conditions support this trend.