The UK housing market has witnessed its largest New Year house price bounce since 2020, with the average asking price for a property coming to market increasing by 1.7% or £5,992 in January, according to property website Rightmove. This surge takes the average asking price to £366,189, although it remains £8,942 below the record set in May 2024, reflecting ongoing affordability challenges.
Rightmove’s report highlights a promising start to 2025, with new properties coming to market, the volume of buyers contacting estate agents, and the number of sales being agreed all surpassing last year’s figures. However, despite this positive momentum, several uncertainties still loom over the market, including the pace of interest rate cuts, the “sticky” mortgage rates, and the upcoming changes to stamp duty in April.
The reduction in the “nil rate” stamp duty threshold for first-time buyers, from £425,000 to £300,000, which will take effect on April 1, 2025, is expected to have a notable impact on the housing market. While buyers in less expensive parts of England may not be significantly affected, the change could act as a drag on the bottom end of the market in higher-priced areas, Rightmove warned. The adjustment is particularly relevant in the context of the first-time buyer sector, which has traditionally been a key driver of the market.
“First-time buyers, particularly those in more expensive areas, are likely to feel the impact of the reduced threshold, making it more difficult for them to get on the property ladder,” said Colleen Babcock, a property expert at Rightmove. “These changes, coupled with high mortgage rates, could dampen demand in some markets.”
Despite these challenges, Babcock noted that the early-year indicators are promising, but she stressed the need for ongoing interventions, such as cuts to the Bank of England’s base rate, to help alleviate affordability pressures. “Many buyers are still feeling the pinch due to high mortgage rates, and first-time buyers face further challenges with higher stamp duty fees from April,” she added.
The surge in new listings and buyer activity suggests that sellers are taking a more measured approach, with many adjusting their pricing expectations. “Sellers seem to be listening to our valuation recommendations more than previously,” said Jordan Halstead, CEO at Jordan and Halstead Estate Agents in Chester. “Mortgage costs are much higher, and people are more attuned to the market realities.”
Looking ahead, Rightmove predicts a 4% increase in average asking prices across 2025, which would likely be driven by continued demand for properties and an anticipated improvement in buyer affordability if mortgage rates start to fall. However, as demand continues to spread across different regions, market conditions are expected to vary significantly.
Tom Bill, Head of UK Residential Research at Knight Frank, also pointed out that as affordability becomes a more pressing concern for buyers, we are likely to see a shift in demand to more affordable areas. “We expect stronger price growth in less expensive locations as buyers look for more affordable homes,” he said. “Traditionally less popular areas will be on the radar for more people.”
Meanwhile, property website Zoopla has identified Scotland and northern England as having the strongest prospects for house price growth in 2025. The markets around Glasgow, including Motherwell, Paisley, Falkirk, and Kirkcaldy, are expected to see the most significant growth in Scotland, while cities in northern England, including Newcastle, Leeds, and Stoke-on-Trent, are also expected to outperform the broader UK market.
Zoopla also forecasted that house prices in Wales, particularly in the southern regions, will see growth, driven by strong economic activity in Cardiff and Newport. However, the picture is less optimistic for mid- and northern Wales, where prices surged rapidly during the pandemic.
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The report also predicted that Northern Ireland would experience rapid house price growth in 2025, as prices catch up with the rest of the UK. Richard Donnell, executive director at Zoopla, suggested that UK house prices are likely to rise by 2.5% over the year, with growth being strongest in regions where affordability is still within reach for many buyers.
Donnell concluded, “While the outlook is best in Scotland and northern England, there is a spread right across the UK, reflecting the demand for and affordability of homes. Serious sellers looking to move home in 2025 need to consider the local market fundamentals, which will have an impact on how you price your home.”
In London, prospects for price growth are improving, with demand starting to pick up following years of stagnation. “The outlook for London is much more positive than in recent years,” Donnell added, advising sellers to consult with local agents to determine the right price for their home in the current market.
As we move further into 2025, the UK property market will likely continue to experience fluctuations driven by economic pressures, changing policies, and shifting demand. For now, the early signs point to a year of gradual growth, albeit with challenges ahead for both buyers and sellers.
