UK House Prices Experience First Monthly Decline Since March as Experts Anticipate Sales Increase Ahead of Stamp Duty Changes
The UK housing market has witnessed a slight downturn in December 2024, marking the first monthly decline since March. According to Halifax, the average house price dropped by 0.2% from November's figure, reaching £297,166. This decline comes after five consecutive monthly increases. Although this drop may seem insignificant, it signals a slight shift in the market's momentum.
On an annual basis, prices have still managed to rise by 3.3%, albeit down from 4.7% growth in November. The moderation in price growth can be attributed to various factors, including changes in mortgage rates and government policies aimed at making homeownership more accessible.
Regional Variations: Northern Ireland Leads the Way
Northern Ireland has demonstrated the strongest annual house price growth in the UK, with prices increasing by 7.4% year-on-year. The average house cost in this region is £205,895. This growth can be attributed to a combination of factors, including low unemployment rates and a strong economy.
Wales has also seen significant house price growth, with prices rising by 4.6% year-on-year. The average house price in Wales stands at £226,646. In contrast, Scotland has experienced lower annual house price growth, standing at 2.4%, with an average house price of £209,959.
London continues to hold the highest average house price across the country, reaching £547,614. This is a 3.3% increase year-on-year. The capital's housing market remains highly competitive, with prices driven by factors such as high demand and limited supply.
Impact of Stamp Duty Changes on the Market
Amanda Bryden, an expert from Halifax, attributes the recent decline in house price growth to the anticipated changes in stamp duty. From April 2025, the "nil rate" band for first-time buyers will shrink from £425,000 to £300,000. This change is expected to provide more motivation for prospective first-time buyers to purchase a home and bring their plans forward.
Stamp duty applies only in England and Northern Ireland. However, even in London, where 8% of homes for sale will be stamp-duty free for first-time buyers from April, the impact of these changes will be felt across the country. The south-east and east of England are expected to see a higher proportion of stamp-duty-free properties, with 24% and 32%, respectively.
Expert Insights: Mortgage Affordability Remains a Challenge
Mortgage affordability is likely to remain a challenge for many buyers in 2025, especially as the Bank of England base rate is expected to come down more slowly than previously predicted. This will lead to increased borrowing costs, making it even more difficult for potential homebuyers to secure a mortgage.
Despite this, experts anticipate modest house price growth in 2025. Matt Thompson, head of sales at Chestertons, notes that December 2024 was one of the busiest Decembers in years in terms of buyer demand. This surge can be attributed to first-time buyers and second-steppers, including young families, who are eager to take advantage of the changing market conditions.
Ashley Webb, UK economist at Capital Economics, offers a more nuanced view. He suggests that recent rises in mortgage rates may have started to weigh on the housing market at the end of last year. However, he still expects house prices to rise by 3.5% in 2025 compared to the consensus forecast of 2.5-3.0%.
Nationwide Figures Reveal Contrasting Trends
Separate figures from Nationwide show that house prices rose more than expected in December and at the fastest annual rate since October 2022. These contrasting trends highlight the complexities of the UK housing market and the need for ongoing analysis and forecasting.
As the market continues to navigate the challenges posed by changing government policies, mortgage rates, and economic conditions, it remains essential for potential homebuyers and investors to stay informed about the latest developments and trends in the industry.