House prices and sales volume expected to grow in 2025 House prices and sales volume expected to grow in 2025 despite Budget headwinds
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The housing market has returned to growth with house price growth now positive across all regions and countries of the UK
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The number of sales is expected to increase by five per cent over 2025 to 1.15m sales completions
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Strong growth in household incomes over the last 2 years (totalling 15 per cent to 2024 Q2) has helped to reset housing affordability, with house prices growing by 1.5 per cent over the same period
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UK house prices are projected to increase by 2.5 per cent over 2025 and by 7.5 per cent over the next three years
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House prices in the Midlands, Northern England, Scotland and Wales are likely to out-perform the UK average while home prices in southern England will lag behind
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 Zoopla, one of the UK’s leading property websites. 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 -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.
Table 1: Annual house price growth turns positive across all areas
Housing sales to increase by another five per cent over 2025 to 1.15m sales
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.
Higher than expected income growth repairs housing affordability
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 ahead4.
Table 2: Zoopla’s measure of UK house price under/overvaluation
North-south divide on housing affordability will remain in 2025
The north-south divide in house price inflation will remain over 2025, a continuation of current trends. Affordability and access to housing is better outside southern England where the income to buy remains high and a drag on house price inflation.
This north-south divide is evident at a local level with the fastest price rises being registered in the Oldham (OL, 3.7 per cent), Wigan (WN, 3.9 per cent), and Belfast (BT, 6.5 per cent) postal areas. In contrast, modest price falls are still being recorded in pockets of southern England led by Ipswich (IP, -1.1 per cent), Truro (TR, -1.2 per cent) and Dartford (DT, -1.2 per cent).
Incomes will need to grow faster than prices to improve affordability, with house prices likely to grow in southern England over 2025 and into 2026.
Table 3: Highest/lowest year-on-year house growth by region and postal area
|
Highest House price growth |
Lowest house price growth |
|||
|
Region |
Postal area |
YoY – % change |
Postal area |
YoY – % change |
|
East Midlands |
Nottingham (NG) |
1.8% |
Lincoln (LN) |
0.3% |
|
Eastern |
St Albans (AL) |
1.0% |
Ipswich (IP) |
-1.1% |
|
London |
Ilford (IG) |
1.6% |
West London (W) |
-0.7% |
|
North East |
Durham (DH) |
3.7% |
Teesside(TS) |
1.8% |
|
North West |
Wigan (WN) |
3.9% |
Crewe (CW) |
1.9% |
|
Scotland |
Falkirk (FK) |
3.5% |
Aberdeen (AB) |
-0.3% |
|
South East |
Slough (SL) |
1.2% |
Canterbury (CT) |
-0.6% |
|
South West |
Plymouth (PL) |
1.5% |
Dorchester (DT) |
-1.2% |
|
Wales |
Swansea (SA) |
2.2% |
Llandrindod Wells (LD) |
0.6% |
|
West Midlands |
Wolverhampton (WV) |
3.1% |
Telford (TF) |
1.1% |
|
Yorkshire and the Humber |
Wakefield (WF) |
3.5% |
York (YO) |
0.7% |
Source: Zoopla
Richard Donnell, Executive Director at Zoopla comments: “The housing market has been resilient in the face of higher borrowing costs over the last two years. Higher income growth and lower mortgage rates have helped reset housing affordability faster than many expected over 2024. This has supported an increase in the number of sales and house prices over the year which we expect to continue over 2025.
“House price growth in southern England will continue to lag the UK average and incomes will need to rise faster than prices to help reset affordability and price more households into the market.
“First-time buyers will remain an important buyer group but existing homeowners looking to move will need more support to help realise their ambitions, with more and more having to look further afield to find better value for money.”
Matt Thompson, Head of Sales at estate agency Chestertons, adds: “As we are approaching the end of the year, we are already seeing more buyers entering the market which is not typical for this time of year and a strong indication that 2025’s property market will be buoyant. One reason for the uplift in buyer activity are changes to stamp duty, announced in the Autumn Budget. These will come into effect in April 2025, driving first-time buyers in particular to get on the property ladder before that deadline and will fuel a busy start to next year’s property market.
“Other buyer demographics, including families, couples, professionals and downsizers considered 2024 a challenging year to buy a property amid political and economic uncertainty but now feel more motivated to resume their search in the new year. Contributing to the return of buyer confidence are lower interest rates, slightly more attractive mortgage products and the fact that the market has benefited from an uplift in the number of properties being put up for sale.
“Despite house hunters having a slightly larger selection of properties to choose from in 2025, pent-up demand will result in most properties attracting multiple buyers which will make for a competitive property search – especially in London and other sought-after destinations across the UK. Due to an ongoing imbalance between supply and demand, most sellers will insist on achieving their asking price. As such, we predict properties in the capital to hold their value or see a gradual increase of up to 3 per cent over the course of next year.”
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