Nationwide House Price Review and Outlook for 2025
Housing market resilient despite ongoing affordability challenges
- Housing market activity proved resilient in 2024 despite ongoing affordability challenges
- House prices to see growth broadly in the range of 2% to 4% in 2025
Looking back at the housing market in 2024 and what we can expect in 2025, Robert Gardner, Nationwide’s Chief Economist, comments:
“Mortgage market activity and house prices proved surprisingly resilient in 2024 given the ongoing affordability challenges facing potential buyers. At the start of the year, house prices remained high relative to average earnings, which meant the deposit hurdle remained high for prospective first-time buyers, a challenge that had been made worse by record rates of rental growth in recent years, which has hampered the ability of many in the private rented sector to save.
“Moreover, for many of those with sufficient savings for a deposit, meeting monthly payments was a stretch because borrowing costs remained well above those prevailing in the aftermath of the pandemic. For example, a typical mortgage rate for someone with a 25 per cent deposit hovered around 4.5% for much of the year, three times the 1.5% prevailing in late 2021 before the Bank of England started to raise Bank Rate.
“As a result, it was encouraging that activity levels in the housing market increased over the course of 2024. The number of mortgages approved for house purchase each month rose above pre-pandemic levels towards the end of the year. Similarly, after starting the year registering small annual declines, the pace of house growth moved firmly into positive territory, approaching 4% in November.
Where next in 2025?
“Upcoming changes to stamp duty are likely to generate volatility, as buyers bring forward their purchases to avoid the additional tax. This will lead to a jump in transactions in the first three months of 2025 (especially in March) and a corresponding period of weakness in the following three to six months, as occurred in the wake of previous stamp duty changes. This will make it more difficult to discern the underlying strength of the market.
“But, providing the economy continues to recover steadily, as we expect, the underlying pace of housing market activity is likely to continue to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth, where the latter is likely to remain broadly in the 2-4% range in 2025.”
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