Between September 2023 and 2024, there was an increase in house prices of 2.9 per cent, according to the Government’s Land Registry. This was higher than inflation, but lower than average wage rises.
Falling mortgage rates could mean that once homes are bought, the monthly repayments are a little lower, however.
Savills estate agency is forecasting growth of 4 per cent, while Hamptons suggests it will be at a lower rate of around 3 per cent.
Renters face more pain as costs surge to record high
Read MoreCharlie Cornes of CEBR told The i Paper the growth would be “driven by increasing affordability and the continuation of interest rate cuts”.
Cheaper mortgage rates generally mean buyers can afford to borrow larger amounts of money.
Experts have previously said that some of the Government’s policies could slow house price growth in 2025 and beyond.
Chancellor Rachel Reeves announced in the Budget in October that second-home buyers, landlords and companies will pay an increased higher rate of stamp duty on additional properties, while the threshold under which first-time buyers are exempt from stamp duty will also be cut.
“First-time buyers paying between the new and old nil-rate band (£300,000 and £425,000) stand to be hit the hardest by the tax hike. Assuming the cash comes out of their deposit, for each £1,000 paid in stamp duty, a buyer with a 5 per cent deposit buyer loses £20,000 off their maximum purchase price, which can significantly reduce their purchasing power,” said Aneisha Beveridge of Hamptons estate agency.
The Government has made a promise to deliver 1.5 million new homes within the next five years, as it says 1.3 million households are on social housing waiting lists.
Experts have said that the new housing targets alone would be unlikely to have a significant impact on prices nationally in the short term, though higher house building over the long term could “suppress” future growth.
There has been some pressure on Labour to introduce policies to boost the spending power of first-time buyers, but it has resisted these calls so far.
Lifetime Isas (Lisas) were launched in 2017 and are designed to help people aged 18 to 39 buy their first home or, much less popularly, to save for retirement. Savers get a 25 per cent government boost when they use the funds to buy a home, but they are not allowed to use the money to buy property costing over £450,000.
Back in September, minister Tulip Siddiq said the cap was set at “an appropriate level” so no change to this is expected in 2025.
What will happen to prices in 2025?
Lucian Cook, of Savills, said: “The direction of mortgage rates has been key to buyer decisions over the past two years, and decreased monthly mortgage costs are now feeding through in to improved confidence amongst prospective buyers, prompting the moderate house price growth we have seen over the past few months.
“A steady improvement in affordability should allow for house price growth to gain momentum over the next couple of years. But there is still some potential for a bumpy ride.”
Emily Williams, director of research at Savills, said: “Lower levels of homeworking and the need to return to commuter hotspots near major employment hubs has driven slightly stronger than expected performance in London over the last 12 months.
“But beyond 2025, affordability will have the biggest influence in every region. Despite falling mortgage rates, buyers in London and the South East will still need to borrow more relative to their income and accumulate a bigger deposit to buy, constraining house price growth.”
“However, the cyclical nature of the housing market means that we forecast that the North West, Yorkshire & The Humber and Wales will have seen prices rise more in 2022 alone than they will over the next four years.”
The maps show the forecasted regional house price growth in 2025 from both estate agents.
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