A Tale of Two Regions
Across the UK, house prices are on the rise, with every region experiencing an increase compared to last year. This trend is expected to continue in 2025, despite potential dampening effects from recent budget changes.
However, a clear north-south divide is emerging. In the more affordable northern regions, prices are rising significantly faster than in and around London, where properties are pricier and more sensitive to interest rate fluctuations. Northern Ireland leads the pack with a 6.3% increase in house prices compared to last year, while the southeast of England has seen a modest 0.3% gain.
Zoopla, a property search website, anticipates a 2.5% increase in house prices throughout 2025, aligning with predictions from other industry analysts. This prediction is fueled by stronger-than-expected income growth and a retreat in mortgage rates, improving affordability for prospective buyers.
Despite the overall positive outlook, affordability pressures are expected to persist in the southeast and London. These southern housing markets are likely to continue lagging behind their northern counterparts.
One factor contributing to this regional disparity is the upcoming budget changes. From April 2025, more buyers will face higher stamp duty rates. Zoopla estimates that this will impact over 80% of buyers, compared to the current 50%. This increase is expected to act as a drag on price inflation, particularly in the south.
In anticipation of these changes, the market is currently experiencing a surge in activity. The number of sales agreed is 19% higher than this time last year, and buyer demand has increased by 25%. Prospective buyers are aiming to complete transactions before the tax changes take effect.
Overall, the UK housing market is expected to remain buoyant in 2025, with continued price increases across most regions. However, the north-south divide is likely to widen, and affordability pressures will remain a concern in the southeast and London. The upcoming budget changes are also expected to have a dampening effect on price inflation, particularly in the south.