Zoopla: price gap between houses and flats reaches 30-year high

The housing market has had a strong start to 2025, with new sales agreed running at 10% higher compared to a year ago, according to Zoopla.

Annual house price growth has dropped slightly from 2% to 1.9% though, with higher mortgage rates and upcoming stamp duty increases to blame.

The property portal reports there are 11% more homes for sale than a year ago, with flats leading the charge. The number of flats for sale surged 14% in the early weeks of this year, versus a more modest increase of 5% in the number of houses for sale.

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Zoopla also says the gap between the value of a house and a flat has reached a 30-year high, with the average house value (£319,500) 1.7x or 67% higher than the average value of a flat (£191,300).

Richard Donnell, executive director at Zoopla comments: “The housing market remains resilient with more people looking to move home in 2025 than this time last year. Average earnings rising by 6% over the last year, well ahead of inflation, is boosting buyer confidence and helping to reset housing affordability.

“Flats have become even cheaper compared to houses. Buyers are still prioritising houses over flats but there are opportunities for canny buyers prepared to do their homework and weigh up the purchase of a flat rather than potentially waiting longer to buy a house.”

Why has the price gap between houses and flats grown so much?

According to Zoopla, while flats offer value for money, buyers have continued to prioritise houses over buying flats, with 52% of first-time buyers outside of London looking for a three-bed house (up from 44% in 2017). Demand for one and two-bed flats has declined from 25% to 17% over the same period.

The “race for space” during the pandemic turbocharged the demand for houses, while concerns over running costs for flats, such as leasehold charges, as well as fire safety concerns for some newer flats, have impacted demand, acting as a drag on flat prices.

The average value of a flat has increased by just 7% over the past five years compared to house values increasing by 24%.

It’s this mismatch in supply and demand – lots of flats for sale, but not many buyers – that explains why the price gap between flats and houses has hit a 30-year high. Over the past year, flat values have risen by just 0.5%, with house values up 2.2%.

Tom Bill, head of UK residential research at the estate agency Knight Frank, comments: “The higher proportion of flats coming to the market in part reflects the fact the stamp duty hike from April will have a greater impact on lower-value markets.”

Where are house prices rising the most?

House price growth stalled or slowed across most regions of the UK in January. This reflected the sharp dip in consumer confidence in the wake of last year's Autumn Budget, with mortgage rates increasing 0.5% since September 2024, squeezing buyer power, said Zoopla.

Looking across the past 12 months, house price growth continues to follow a north-south divide. Average prices are 7.2% higher in Northern Ireland and 3% higher in the North-West.

House prices across London and southern England edged up only 1% to 1.2%.

What’s the outlook for house prices this year?

The supply and demand imbalance, and the upcoming stamp duty changes, will likely keep house prices in check this year.

On 1 April, the tax-free stamp duty thresholds will drop back to their original levels of £125,000 for regular buyers (it’s currently £250,000) and £300,000 for first-time buyers (from £425,000).

According to Zoopla, half of homeowners will have to pay an extra £2,500 per purchase in stamp duty when the thresholds fall. Two-fifths of first-time buyers will pay higher stamp duty from April but 60% will still pay no stamp duty.

“Home buyers will expect to reflect this extra cost in their offers, typically looking to split the cost with the seller. The amounts are not large, but the overall impact will keep house price growth in check over 2025,” says Zoopla.

Bill at Knight Frank adds that “demand is playing catch-up with supply in the UK housing market, which is keeping downwards pressure on prices”.