January Housing Stagnation: Impact on the Market
In January 2025, January housing stagnation led to stable buyer interest and completed sales compared to December 2024. This pause in momentum has been largely attributed to recent fluctuations in government borrowing costs, which have tempered buyer enthusiasm.
Impact of Rising Government Borrowing Costs
The Royal Institution of Chartered Surveyors (RICS) noted that the deceleration in buyer demand during early 2025 was likely linked to turbulence in the financial markets observed in the first half of January. This volatility led to a significant sell-off in UK government bonds, known as gilts, causing yields to surge to levels unseen since the 2008 financial crisis. This sell-off was part of a broader global trend and subsided within two weeks. However, it prompted buyers to delay transactions until conditions stabilised.
Anticipated Acceleration in Sales Activity: January Housing Stagnation
Despite the January lull, there is optimism for a substantial increase in housing market activity as the year progresses. A net balance of +30% of RICS survey respondents expressed expectations of rising sales in the coming year. The Bank of England‘s recent decision to cut interest rates by a quarter point to 4.5% partly influences this positive outlook. Experts anticipate that the reduction will reignite buyer enthusiasm, make borrowing more affordable, and stimulate increased market activity.
Continued House Price Growth Amid Market Turbulence
Interestingly, the recent financial market turbulence did not deter house prices from climbing across the country. A significant number of agents reported price increases during January. This trend suggests that, despite short-term uncertainties, the underlying demand for housing remains robust. Moving forward, respondents continue to envisage a slightly positive near-term outlook for sales activity. The unwinding of some of the pressures around mortgage interest rates over the past couple of weeks should further support this.
Challenges for First-Time Buyers
The interest rate cut is expected to boost buyer enthusiasm, but first-time buyers still face challenges. House prices have risen again in January, and given that mortgage rates remain relatively high compared to recent years, it means a real stretch for anyone trying to get onto the property ladder. The combination of higher property prices and elevated mortgage rates necessitates careful financial planning for prospective homeowners.
Rental Market Dynamics
In the rental sector, demand remained relatively stable. However, fewer landlords made properties available, leading to a decrease in supply. As a result, most expect rents to keep rising, despite renters facing more pressure than homeowners. This trend could end up pushing millions of renters over the edge – forcing them to make incredibly difficult decisions about how to cut their costs to stay on track.
Conclusion: January Housing Stagnation
The UK’s housing market in January 2025 experienced a temporary stagnation, influenced by financial market volatility and rising government borrowing costs. However, with anticipated interest rate cuts and a resilient underlying demand, the outlook for the remainder of the year remains cautiously optimistic. Both buyers and renters should stay informed and consider their financial positions carefully as the market evolves.
