The housing market had a busy start to the year as buyers raced to beat changes to stamp duty thresholds at the end of March, but the outlook is more uncertain now that property purchase costs are higher. Households could also be hit by Donald Trump's trade tariffs.
The latest house price index data paints a mixed picture.
Official figures from HM Land Registry, published on 16 April, show house prices rose by 5.4% annually in February, up from 4.9% the month before. This takes the average UK property to £268,000, around £13,000 higher than a year ago.
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More recent data from Halifax also paints a resilient picture. House prices rose by 3.2% annually in April, the mortgage lender reported, up from 2.9% the month before. On a monthly basis, prices rose by 0.3%.
This contradicts what other sources have been reporting.
The latest Nationwide House Price Index shows annual house price growth slowed in April to 3.4%, down from 3.9% in March. Prices also fell by 0.6% on a monthly basis, coinciding with lower stamp duty thresholds.
Meanwhile, April’s sentiment survey from the Royal Institution of Chartered Surveyors suggested house prices were “more or less flat”, while measures of new buyer demand and agreed sales both weakened.
Will stamp duty changes put the brakes on the housing market?
In recent months, experts have been warning of a potential slowdown in the property market after stamp duty thresholds dropped on 31 March.
First-time buyers now begin paying the controversial property tax on homes worth more than £300,000, down from £425,000 previously. Meanwhile, home movers have seen the tax-free threshold drop from £250,000 to £125,000.
“The market is likely to remain a little soft in the coming months since activity will have been brought forward to avoid the additional tax obligations – a pattern typically observed in the wake of the end of stamp duty holidays,” said Nationwide’s chief economist Robert Gardner.
Despite this, he expects activity to pick up as we progress through the summer.
What's happening with sold house prices?
Sold house prices are the most accurate indication of what is happening in the UK property market. The official figures published by HM Land Registry are the most authoritative source, however they come with a two-month time lag.
The 5.4% increase in the year to February, published in HM Land Registry’s latest report, is up from 4.9% in January. Prices held firm on a monthly basis in February, with growth coming in at 0%.
“This suggests a housing market that continues to defy expectations,” said Karen Noye, mortgage expert at wealth manager Quilter.
That said, the time lag associated with this index means you might need to consider it alongside other sources to get an indication of current market conditions – particularly in light of the stamp duty changes that took place at the end of March.
Major lenders like Halifax and Nationwide publish house price data with a shorter time lag, but this is based on the lender’s valuation at the mortgage-approval stage. This can differ from the actual sale price, but the idea is that it is near enough to the end of the home-selling process to offer a more realistic snapshot than initial asking prices.
Property website Zoopla also publishes a house price index, which uses sold prices, mortgage valuations and data for agreed sales. We look at which house price index is best in further detail in a separate article.
House price index | Report date | Monthly change | Annual change | Average UK house price |
Figures shown cover February | +0% | +5.4% | £268,319 | |
Figures shown cover April | -0.6% | +3.4% | £270,752 | |
Figures shown cover April | +0.3% | +3.2% | £297,781 | |
Figures shown cover March | +0.1% | +1.6% | £267,400 |
Regional house price variations
There are of course big regional variations, but using the “house prices in your area” report from the Office for National Statistics can help you understand how prices have changed in your borough or local authority area.
The latest report from HM Land Registry suggests prices are growing at the fastest rate in Northern Ireland (9% annually), followed by Scotland (5.7%), England (5.3%) and Wales (4.1%). Of the English regions, the North West is seeing the fastest growth (8%).
Meanwhile, London saw the lowest level of growth at 1.7%. Prices in London are particularly high, with the average house now costing almost £556,000. This suggests affordability limits have become stretched.
Affordability is stretched in London, meaning house prices are rising more slowly in the capital than elsewhere. Stamp duty changes are also likely to have the biggest impact in London and the South East.
Different property types are also seeing significant variations in price. Data from Zoopla shows the gap between the value of the average house and the average flat widened to a 30-year high earlier this year. As of January, a typical house was 67% more expensive than a flat.
“The search for space over the pandemic boosted demand for houses, while concerns over the running costs of flats, such as service charges and ground rents, has acted as a drag on flat prices. Building safety is another factor impacting demand for some recently-built flats,” Donnell explained.
Are property asking prices going up?
Asking prices are a useful barometer for market sentiment as it currently stands. These snapshots tend to be published only a few weeks after the data was recorded. The drawback is that asking prices don’t necessarily reflect the final sold price.
Rightmove data shows that asking prices increased by 1.4% on a monthly basis in the first few weeks of April. This is a “larger-than-usual” increase for this time of year, according to the property website, taking the average asking price to a record £377,182. On an annual basis, prices were up 1.3%.
“We’ve seen our first price record in nearly a year, despite the number of homes for sale being at a decade high,” said Colleen Babcock, property expert at Rightmove. Typically, you would expect an increase in housing supply to keep prices suppressed thanks to the laws of supply and demand.
Despite this, sellers should still be careful when deciding on an asking price. Not everyone will be able to achieve the asking price they set – and some sellers may have to adjust their expectations as buyers manage the additional costs associated with a higher stamp duty bill.
Will house prices rise in 2025?
Although stamp duty changes have acted as a headwind in recent weeks, Halifax is cautiously optimistic about the outlook going forward.
“Mortgage rates have continued to fall, with most lenders now offering rates below 4%. Coupled with positive earnings growth that has outpaced broader inflation, these factors have helped to steadily improve affordability for many buyers,” said Amanda Bryden, head of mortgages at the bank.
“Overall, the market continues to show resilience despite a subdued economic environment and risks from geopolitical developments,” she added. “There is likely to be a bump-up in consumer price inflation as household bills increase, but with further base rate cuts also expected, we anticipate a similar trend of modest price growth this year.”
Most experts agree with Bryden’s suggestion that house prices will end 2025 in positive territory. Both Zoopla and real estate consultancy Knight Frank have forecast 2.5% growth by the end of the year, while estate agent Savills has predicted 4%.
Regional variations are likely, with prices forecast to rise more rapidly in the north than the south.
House prices are expected to increase by 5% in the North West, the North East, Scotland, and Yorkshire and the Humber, according to Savills. Prices in the East of England and the South West are forecast to increase by 2.5%.
Will Trump’s tariffs impact house prices?
Some of the worst tariffs announced by Trump on 2 April have now been paused, but global growth is still expected to take a knock. Most countries have been slapped with a baseline tax of 10%, while China has been hit with an effective tariff rate of 145% across most goods.
The uncertainty has stoked fears of a global economic slowdown, which could hit homebuyer demand. The silver lining is that tariffs could force the Bank of England to cut interest rates more quickly, which could bring mortgage rates down.
Marc von Grundherr, director of Benham and Reeves, remains optimistic. “The property market remains fighting fit despite the wider economic turbulence faced on numerous fronts, not least from Trump and his tariff war, and whilst we may see the odd monthly adjustment, the real proof in the pudding is a robust level of annual growth.
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