UK housing tracker outlook - Q4 2024

Our latest analysis of the housing market shows a strong ending to 2024, with further growth in house prices and market activity anticipated. Changes in stamp duty tax are likely to cause a surge in housing activity in the first quarter of 2025, along with a general increase in activity as interest rates ease further and more mortgage products come to market. However, persistent challenges, including ongoing labour shortages, supply chain instability, and rising tax concerns, balance the outlook, presenting both challenges and opportunities going into 2025. 

House price growth across all regions in 2024

House prices continued their upward trend in the final quarter of 2024, with the North experiencing the largest increase at 2.3%. The North-West, Scotland and East Midlands also saw house price growth exceeding 1%. 

Throughout 2024, every region recorded house price growth, with a UK average of 3.1%. A notable North/South split emerged, with Northern regions experiencing the fastest growth. Northern Ireland topped the table, with prices increasing by over 7% in the year, closely followed by the North and North-West, both exceeding 5.5%. In contrast, house price growth in the South and London was closer to 2%. 

The average UK house price now stands at over £271k, remaining below peak figures in Q3 2022, when the average house price was above £275k.

Transactions point to a stimulated housing market

For the first time in two years, the UK recorded over 300k transactions in a single quarter. Q4 saw 18% more transactions compared to the same period 12 months ago. Interest rate cuts in 2024 have boosted buyer demand, while stamp duty changes announced in the Autumn Budget, set to take effect from April 2025, are also having an impact. This momentum may continue as buyers race to beat the deadline.

Despite tax changes, the positive sentiment for the housing market should carry throughout 2025. 

Taking stock: government announces a new standard method

The government will to introduce a new standard method that uses housing stock to set a baseline figure for target expectations across England, aiming to reach 1.5m new homes. The new method demonstrates a shifting distribution, with each region in England except London expected to deliver increased housing stock compared to previous targets. While the new method looks to rebalance regional targets, some unrealistic metrics have been set. For example, London’s new targets are 257% higher than the actual homes built the previous year. This continues to raise concerns for housebuilders about whether new targets truly reflect future geographical volume demand.

Analysis published by Glenigan in December revealed a 5% decrease in the value of detailed planning approvals year-on-year. However, housing starts saw growth in the North-West and Northern Ireland compared to the previous year. The West Midlands and Wales experienced an increase in planning approvals, while other regions faced declines in both housing starts and planning approvals. Notably, the Welsh government has extended the Help to Buy scheme for an additional 18 months beyond its scheduled end date in March, which is expected to sustain activity in the region.

Will there be more deal activity in construction in 2025?

Last year, billions of pounds of transactions took place in the construction sector, most notably Barratt and Redrow’s merger, and the sale of Cala Group to private equity. Looking forward, we anticipate transactions to continue with consolidation at regional level. This activity is driven by a focus on securing development land, increasing labour forces, and advancing technology and innovation in areas such as construction materials, modular construction and prefabrication. Large housebuilders may look to acquire to stabilise their supply chains amid concerns about volatility among smaller sub-contractors.

It is likely we will see land transactions in the following 12 months as many housebuilders focus on sites they deem viable for development and raise cash to unlock working capital. 

Further partnerships are anticipated with local authorities and social housing providers to achieve new affordable housing targets. A big question remains regarding lenders’ appetite for first-time buyers at higher income multiples and whether homes will be affordable for first-time buyers given the further house price rises forecasted. 

Mortgage approvals rise in Q4 2024

Mortgage approvals rose in Q4 as rates held steady. Throughout 2024, home mortgage approvals increased by 30% compared to the previous year. The mortgage lending rate for 75% and 95% loan-to-value (LTV) ratios was, on average, 0.5%-1% lower than the corresponding period a year ago. The rise in mortgage approvals further points to the resilience of the housing market and an acceleration of purchases before stamp duty changes in April. 

In 2024, annual wage growth outpaced house price growth, and the overall economic outlook appears brighter than it did 12 months ago. However, future wage growth will be impacted by firms’ approaches to the increases in employment and tax costs imposed in the Autumn Budget. Affordable housing remains in dire supply, and buyers remain cautious, as can be seen in recent consumer spending statistics. It was reported that, at current building rates, it could .

91̽»¨predictions

• House prices will increase between 3-4% by the end of the year.
• Over the next five years, house prices are likely to see a 23% increase.
• We stand by our previous prediction that an upturn in housing volumes will start to be seen from spring 2025.
• The devolution of planning and a focus on housing demand calculations will foster more collaborative partnerships with local authorities, leading to geographical changes in build volumes.
• A focus on urban areas and creating smart cities will stimulate the repurposing of old buildings and innovative ways to create better experiences at work, home and during leisure. 
• Changes to inheritance tax (IHT) in pension funds could divert previously invested funds—now subject to IHT in estates—into property, with investors viewing the industry as a growth area. 

For more information, please contact Kelly Boorman or your usual 91̽»¨contact.