House prices move upwards, according to Zoopla's assessment
The UK housing market is set to experience modest growth in 2025, with house prices expected to rise by 1-4% nationally, according to predictions from Zoopla and conveyancing solicitors. This growth comes after a year of steady increases, with house prices rising by nearly 2% in the year to November 2024.
The market's trajectory is influenced by a balance of economic conditions, mortgage rates, rising supply, regional affordability differences, and buyer caution.
Economic and employment market strength remains a crucial driver for house prices. A stable economy and strong employment give buyers confidence and the ability to purchase, supporting price growth. However, current mortgage base rates, sitting at around 4.25%, continue to impact buyer affordability. Limited prospects for rate cuts combined with persistent inflation make buyers cautious and price-sensitive, slowing growth, especially in higher-value markets.
There has been a notable increase in housing supply, with 14% more homes for sale compared to the previous year and the fastest sales activity in four years. This greater choice for buyers has curbed price growth by giving buyers more options and forcing sellers to price realistically to secure sales.
Price growth is uneven across regions, closely linked to affordability. Northern areas, such as the North West, North East, Scotland, Yorkshire and the Humber, are experiencing faster price rises (around 3-5%) due to relatively affordable housing and modest supply increases. In contrast, southern regions, including London, South East, and South West, see minimal or even negative growth (<0.5% or slight falls) because of high prices and bigger supply increases, making it harder for prices to rise there.
Despite modest annual price inflation of about 1.4%, buyers are more discerning due to economic uncertainty and affordability constraints. Homes over £500,000 have seen price drops, and approximately 22% of homes remain unsold after six months, indicating a slower market momentum.
Another factor influencing the market is wage growth versus inflation. While average earnings are rising by roughly 5% annually, persistent inflation reduces real purchasing power. This tension influences buyer capability and supports cautious pricing in the market.
However, there are potential cost savings to be made for homebuyers. For example, improvements to energy efficiency could save up to £2,000, while careful inspections could prevent costly surprises such as subsidence or damp, potentially saving up to £4,500. Furthermore, the sales pipeline in the housing market increased by 30% year-on-year, which may lead to more properties coming onto the market and potentially more opportunities for cost savings.
Interestingly, house prices in Aberdeen are the cheapest, averaging at £137,000, while London remains the most expensive, with an average house price of £535,000. House prices in Aberdeen are showing the slowest rate of price growth, while Belfast is experiencing the fastest, with an increase of 6.9% over the past year.
In conclusion, the UK housing market in 2025 is characterised by modest house price growth, heavily influenced by a balance of economic conditions, mortgage rates, rising supply, regional affordability differences, and buyer caution, as highlighted by Zoopla and industry experts including conveyancers and real estate consultancies.
- The balance of economic conditions, mortgage rates, and the rising supply suggest that prospective investors in the UK housing market may find opportunities in areas with relatively affordable housing and modest supply increases such as the North West, North East, Scotland, Yorkshire and the Humber.
- To make costs more manageable, homebuyers can consider various tactics such as improvements to energy efficiency, careful inspections to prevent costly surprises, and capitalizing on an increased sales pipeline in the market, which could lead to more properties being offered at competitive prices.
- With house prices in major cities like London being significantly higher compared to other regions, and economic uncertainty and affordability constraints affecting buyer behavior, investors looking to invest in real estate might find higher returns in regional markets where growth is more pronounced, such as Belfast, while keeping an eye on mortgage rates to ensure affordability and minimize risk.
