House Price Increase: Why Have Prices Risen This Month?
House Price Increase: As we emerge from the festive season, many are considering their housing prospects for 2025. Our latest House Price Index shows a surge in house prices. The national average has risen by 1.7%, reaching £366,189.
This price increase follows what has been an incredibly busy period for the housing market. The day after Christmas, typically quieter for property sales, actually saw the highest levels of traffic and new listings we have ever recorded. As a result, there has been an 11% rise in the number of sellers putting their homes on the market compared to this time last year. Consequently, buyers now have a broader selection of properties. This is the widest choice since the beginning of 2015.
Additionally, we have seen a significant 9% increase in the number of buyers reaching out to agents regarding properties for sale. The number of agreed sales has risen by 11% year-on-year. This further demonstrates the high interest in property purchases.
What Has Happened to House Prices This Month?: House Price Increase
The beginning of the year has witnessed an unprecedented jump in house prices, marking the largest increase we’ve seen since 2020. This trend has been mirrored by the highest number of Mortgage in Principle applications ever recorded at the start of the year. This shows that many individuals are evaluating their affordability. They are also determining how much they can borrow.
The influx of new properties has given buyers more choice. It has also led to more inquiries and sales agreements. However, with so many homes now available for purchase, sellers may face growing competition as they strive to secure a buyer. As a result, some sellers may find that their initial asking price was overly optimistic and may need to lower it to align with market expectations.
Despite these price increases, it’s important to note that average asking prices are still £8,942 below the peak recorded in May 2024. This ongoing adjustment reflects the affordability challenges still faced by many buyers.
Expert Insights: What Are Property Professionals Saying?
The start of the year has been busy. If this momentum continues, we may see an active spring market. Spring is traditionally the busiest time for property transactions. Therefore, this early surge may signal a strong housing season.
However, experts caution that there are several factors still in play that could affect the market. The future of interest rates remains uncertain. Additionally, the impact of increased stamp duty from April 1st could affect the housing sector.
Colleen Babcock, one of our property experts, explains: “When looking at the broader market, it is clear that many buyers are still facing affordability pressures. High mortgage rates limit borrowers’ capacity. As a result, they are restricted in the amount they can afford to pay for properties. First-time buyers are facing a reduction in support schemes. Additionally, they will face higher stamp duty costs starting in April. Many are also grappling with record-high rents, all while trying to save for a deposit.”
Colleen continues: “While the beginning of 2025 looks promising, the market will need further support for that momentum to be sustained. A reduction in the Bank of England’s base rate, which would hopefully bring down mortgage rates, would certainly be beneficial. Additionally, first-time buyers, particularly those in expensive areas, would welcome further assistance to help them enter the market.”
What Can We Expect Going Forward?: House Price Increase
Looking ahead, it seems that 2025 is likely to remain a buyer’s market for the foreseeable future. This is due in large part to the increase in available properties and longer average times for homes to sell. Buyers are now presented with greater choices, which could mean more time for them to shop around and secure the best deal. However, it could also lead to longer waiting periods for sellers as they attempt to find suitable buyers for their homes.
We anticipate continued uncertainty in the coming months. Changes to stamp duty and Bank of England decisions will play key roles. These developments could have significant implications for both buyers and sellers as the year progresses.
Mortgage expert Matt Smith shares insights into the market. Better-than-expected inflation figures followed news of high borrowing costs. While many markets are still predicting a reduction in the Bank of England’s base rate in February, beyond that, the outlook remains uncertain. It will likely take more time for the direction of interest rates to become clearer.”
Will Stamp Duty and Interest Rates Continue to Shape the Market?
The potential changes to stamp duty from April 1st are one of the key factors that will shape the housing market in the near future. The increase in stamp duty will undoubtedly affect many home movers, particularly those purchasing higher-priced properties. First-time buyers, who may have relied on stamp duty exemptions or reduced rates, will feel the impact more acutely. This change is likely to slow some activity in the market, particularly in higher-end segments.
In addition to stamp duty changes, the Bank of England’s decision on interest rates will continue to be a crucial factor influencing the housing market. Many expect rates to be cut in February. However, uncertainty remains about the future trajectory of rates in 2025.
The Impact of High Mortgage Rates on Affordability
One of the key challenges buyers face in the current market is the high level of mortgage rates. Despite the recent increase in house prices, many potential buyers are finding it increasingly difficult to secure the financing they need. With borrowing costs remaining elevated, affordability continues to be a significant concern for those hoping to purchase a property.
High mortgage rates not only affect first-time buyers but also those looking to move up the property ladder. Homeowners who are considering selling their property and purchasing a new one are finding that the higher rates make it more difficult to afford a larger home. As a result, many people choose to stay in their current homes longer. This reduces properties available in certain price brackets.
A Buyers’ Market with Long-Term Potential: House Price Increase
Despite the current challenges, the housing market in 2025 presents significant opportunities for buyers. The increased number of homes for sale offers more options to buyers. However, affordability issues will likely reduce upward price pressure. In fact, many sellers may be forced to adjust their asking prices if they are unable to secure a buyer within a reasonable timeframe.
For buyers, this means that they will have more negotiating power. Properties that have been on the market for longer may be more likely to accept lower offers, as sellers become increasingly eager to close deals. However, buyers should stay cautious and consider the long-term effects of higher mortgage rates. This is crucial when stretching budgets.
Conclusion: What Lies Ahead for the Housing Market in 2025?
The housing market in early 2025 has shown signs of increased activity, with rising house prices and more properties entering the market. However, affordability continues to be a significant issue, and many buyers are facing challenges in securing financing. Experts are hopeful that interest rates will decrease. However, higher stamp duty and affordability pressures will shape the market ahead.
For those considering a move in 2025, the key will be staying informed and being prepared for the potential challenges ahead. The market may stay a buyers’ one for now. However, carefully considering mortgage options and interest rates will be essential.
As we move into the spring season, it will be interesting to see how the market develops in response to changing conditions. The outlook remains uncertain. However, those who navigate the challenges could find exciting opportunities in the 2025 property market.