Strong income growth and lower mortgage rates have repaired the housing market being overvalued, the latest Zoopla House Price Index (HPI) claims.

Research from the property portal claims housing has become more affordable and average house prices are set to remain undervalued in 2025.

This assumes an average mortgage rate of 4.25%, house prices rising by 2.5% and income growth of 4.6%.

Zoopla’s analytical model determines if prices are under or overvalued based on average house prices and wage growth.

Its latest House Price Index for November suggests that the housing market has returned to growth with house price growth now positive across all regions and countries of the UK.

Average UK house prices are up 1.5% annually to £267,600, the report said, as the housing market has now “largely adjusted” to higher borrowing costs.

UK house prices are projected to increase by 2.5% over 2025 – held back by Stamp Duty changes in April – and by 7.5% over the next three years, according to the index.

The fastest price gains were registered in Northern Ireland (6.3%) and the North West region (2.9 %).
House price growth remains below 1% across southern England where affordability pressures are an ongoing drag on the scale of house price growth.

As of 24 November, new stock supply was up 15%, the number of sales agreed had risen 19% and buyer demand was up 24%.

The number of sales is expected to increase by 5% over 2025 to 1.15m sales completions, Zoopla said.

Richard Donnell, Executive Director at Zoopla, comments:

“The housing market has been resilient in the face of higher borrowing costs over the last two years.

“Higher income growth and lower mortgage rates have helped reset housing affordability faster than many expected over 2024.

“This has supported an increase in the number of sales and house prices over the year which we expect to continue over 2025.

“House price growth in southern England will continue to lag the UK average and incomes will need to rise faster than prices to help reset affordability and price more households into the market.

“First-time buyers will remain an important buyer group but existing homeowners looking to move will need more support to help realise their ambitions, with more and more having to look further afield to find better value for money.”

Commenting on the index, Toby Leek, president of NAEA Propertymark, said:

“With interest rates easing and affordability improving, many buyers will have increased confidence and may be presented with better mortgage offers compared to what they were seeing at the start of the year in order to make their next home purchase a reality.

“The market is set to see a continued spike in homes for sale and serious buyers coming to the fore despite winter months historically being a quieter time due, in part, to many people across England and Northern Ireland wanting to complete before the rises to Stamp Duty commence from April 2025.”

Kindly shared by Estate Agent Today