House prices and sales volumes are expected to grow in 2025 despite budget headwinds, reveals the forecast edition of the latest House Price Index from property website Zoopla.
The average house price is currently £267,200 having increased by 1.5 per cent over the last 12 months (an increase of £3,900).
The housing market returned to growth in 2024, with UK house prices recording average growth of 1.5 per cent in the 12 months to October 2024, up from minus 1.2 per cent a year ago.
All regions and countries across the UK have recorded positive year-on-year growth, with the fastest price gains registered in Northern Ireland (6.3 per cent) and the North West region (2.9 per cent).
House price growth remains below one per cent across southern England where affordability pressures are an ongoing drag on the scale of house price growth.
Sales agreed over the last four weeks are currently up 19 per cent year-on-year1, with buyer demand 25 per cent higher over the same period. The sales market is on track for 1.1m sales completions over 2024 – 10 per cent higher than in 2023.
Sales completions over 2025 will be supported by a robust sales pipeline, 30 per cent larger than this time last year, which is expected to deliver a strong start in the first few months of next year.
Zoopla expects the number of sales to increase by five per cent over 2025 increasing to 1.15 million. Postponed home moves, an ageing population, rising running costs and changing working patterns will continue to impact moving decisions, in addition to the desire to seek a better home or location.
First-time buyers will remain the largest buyer group, supporting housing chains and helping existing homeowners to move.
Rising incomes have helped to reset housing affordability over 2024 in the face of higher borrowing costs.
Data from the Office for Budget Responsibility (OBR) shows household disposable incomes increasing by 15 per cent between 2022 Q2 and 2024 Q22. House prices grew by just 1.5 per cent over the same period, a trend that has helped to repair housing affordability without the need for additional support from a fall in house prices.
Last year Zoopla reported that UK homes were over-valued by 16 per cent as a result of the jump in mortgage rates. Rising incomes and lower mortgage rates over 2024 have removed this over-valuation without the need for prices to fall further in 2024.
This means the housing market has largely adjusted to higher mortgage rates, opening up the opportunity for continued modest growth in house prices which are expected to increase by 2.5 per cent over 2025 assuming mortgage rates average 4.25 per cent over the year ahead.
