Zoopla: housing market returns to growth

UK house prices are expected to increase 2.5% in 2025, according to property website Zoopla.

Across the whole of the UK, house prices increased 1.5% in the four weeks to 17 November, Zoopla’s latest house price index revealed. This is up from 1% the previous month, and marks a return to year-on-year increases from the same period the previous year when prices fell by 1.2%.

“The housing market has been resilient in the face of higher borrowing costs over the last two years,” said Richard Donnell, executive director at Zoopla.

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August’s interest rate cut continues to stimulate activity in the UK’s housing market. In November, buyer demand increased 24% year-on-year and the number of sales agreed rose 19%. New supply of houses increased 15%, while the stock of for-sale homes increased by 10%.

“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,” said Matt Thompson, head of sales at estate agency Chestertons. This, he says, is “a strong indication that 2025’s property market will be buoyant”.

Changes to stamp duty announced in the Autumn Budget are one possible reason for this late uptick in new houses. “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,” says Thompson.

What will happen to house prices in 2025?

“We expect house prices to rise by 2.5% over 2025 with 5% more sales compared to 2024,” said Donnell.

Donnell attributes 2024’s increased housing market activity to faster income growth and lower mortgage rates, contributing to greater house price affordability. Income growth has been stronger than Zoopla previously expected, with OBR data showing a 15% increase in disposable household income in the two years to the second quarter of 2024.

These trends are expected to continue to provide positive momentum for the housing market through next year. Zoopla expects 1.15 million house sales in 2025. If correct, this level would mark the highest annual number of housing sales since 2022.

The UK’s housing market is on track for 1.1 million sales in 2024, which would mark a 10% increase on 2023’s figure.

House prices increase across the UK

Annual house prices on Zoopla were positive across all regions in the UK in October 2024, the report shows, having been negative in 10 of the 12 regions surveyed a year before.

Northern Ireland showed the greatest annual house price growth at 6.3%, followed by the North West at 2.9%. The average price of a house in Belfast increased 6.3% to £180,300, while the average house price in Wigan increased by 3.9%.

The slowest rate of growth in housing prices was in the South East, at 0.3%. While house prices in Scotland increased 2.3% overall, the average house price in Aberdeen fell by 0.6% to £136,500. Ipswich, West London and Canterbury also saw house prices fall, while Dorchester saw the largest decline of any area, at 1.2%.

“The best market conditions [are] in regional markets where affordability is less of a barrier to moving home,” said Donnell.

Zoopla’s affordability model suggests that house prices in England’s southern regions are overvalued by 30% or more, based on average national incomes. In contrast, house prices are fairly valued in the Midlands, Northern England, Scotland and Wales.

However, Thompson believes that London homes could still retain their value given what he expects to be a competitive market for house buyers. “Pent-up demand will result in most properties attracting multiple buyers,” he says, “which will make for a competitive property search – especially in London and other sought-after destinations.

“As such, we predict properties in the capital to hold their value or see a gradual increase of up to 3% over the course of next year.”

Are mortgage rates going down?

Mortgage rates for home buyers fell by 1% in the last year to a current average of 4.1%, according to the report.

Unfortunately, though, Zoopla doesn’t expect mortgage rates to come down further in 2025.

While Zoopla projects little change in nationwide mortgage rates during the year, it does expect lenders to display innovation in affordability assessments, which should act to bolster demand for housing.

However, according to Tom Bill, head of UK residential research at Knight Frank, much depends on the success of the Labour government’s economic plan.

“For now, post-Budget certainty and mortgage rates agreed before 30 October are underpinning momentum,” he said. He cautioned, however, that extended upwards pressure on unemployment, inflation and borrowing costs could prompt a period of stagflation, which “would put downwards pressure on house prices and transaction volumes”.