House price growth slows in first index of 2025
House price growth has started the year slower despite hopes of a boom amid the Stamp Duty rush, the latest Nationwide House Price Index has revealed.
January data from the building society shows average prices were up 4.1% annually to £268,213, down from 4.7% in December.
Monthly price growth was at just 0.1% compared with 0.7% a month before.
Robert Gardner, chief economist for Nationwide, blamed stretched affordability.
He said: “ A prospective buyer earning the average UK income and buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 36% of their take-home pay – well above the long-run average of 30%.
“Furthermore, house prices remain high relative to average earnings, with the first-time buyer house price to earnings ratio standing at 5.0 at the end of 2024, still well above the long run average of 3.9. Consequently, the deposit hurdle remains high. This is a challenge that has been made worse by the record increase in rents in recent years, which, together with the cost-of-living crisis more generally, has hampered the ability of many in the private rented sector to save.”
Estate agents still managed to see the positive side though.
Jonathan Handford, managing director at national estate agent group Fine & Country, said:
“January is often a strong indicator of the year ahead in the property market, and this year’s performance so far paints a positive picture.
“Although growth slowed in January year-on-year, month-on-month prices rose slightly.
“Strengthening buyer confidence, supported by a more stable economic backdrop, continues to drive demand. Last year’s steadying inflation rates and the gradual reduction in interest rates helped to restore market sentiment, providing a solid foundation for growth in 2025.
“Another key factor driving activity is the anticipation of tax changes, particularly the adjustments to stamp duty thresholds set to take effect in April. This has encouraged buyers to act sooner rather than later to maximise potential savings.”
He highlighted the latest Zoopla House Price Index, which showed buyer demand up 13% year-on-year in January and 10% more homes available.
Handford said:
“While rising demand typically puts upward pressure on prices, greater housing supply could help temper excessive price increases, ensuring the market remains accessible.
“A key demographic that will determine the market’s sustainability this year is first-time buyers. While the looming Stamp Duty changes have fuelled activity among this group, a long-term approach is needed to prevent a slowdown once the changes take effect. Without continued support measures, affordability concerns could resurface, making it harder for first-time buyers to get onto the property ladder.
“Looking ahead, a ‘likely’ interest rate cut by the Bank of England in February could further boost the market by prompting lenders to lower mortgage rates. However, the extent and timing of cuts depend on inflation trends — if inflation eases, rate reductions are likely, but persistent pressures could delay them.
“Overall, the UK property market enters 2025 with signs of stability held up by modest growth. The coming months will reveal whether these trends hold or if affordability concerns and inflation start to weigh on growth. With key policy changes ahead, a balanced approach will be vital to sustaining stability and accessibility for buyers.”
Nathan Emerson, chief executive of Propertymark, added:
“Moving into 2025, it’s positive to see that house prices and mortgage lending remain resilient despite continued affordability pressures.
“Currently, it’s likely a lot of movement in the market is due to people wanting to push through with their purchases and sales before the Stamp Duty rises in England and Northern Ireland in April. However, one aspect helping maintain momentum in the marketplace is the fact that mortgage rates and financial pressures are slowly improving for those looking to make a move.
“Propertymark member agents have reported that new buyers registered per branch have on average increased year on year by 44%. Therefore, with demand rising, now is potentially a great time to consider putting your house on the market and taking advantage of current market conditions.”
Sarah Coles, head of personal finance at Hargreaves Lansdown, took a different view, adding:
“Prices are still under pressure from buyers trying to clamber through the Stamp Duty holiday window, before it slams shut at the end of March. Another small bump for house prices is another knock for first time buyers.
“The property market risks becoming a victim of its own success, with prices near a record high.”
Meanwhile, HMRC data shows UK residential sales were up 19% on a seasonally-adjusted basis in December 2024 at 96,330 – 3% higher than November 2024
The provisional non-seasonally adjusted estimate is 98,120, 15% higher than December 2023 and 7% lower than November 2024.
Nick Leeming chairman of Jackson-Stops, said:
“The rise in transactions in December can largely be attributed to the pending Stamp Duty deadline in March.
“No doubt buyers across London and the South East in particular would have been pushing for deals to get across the line given the traditionally higher tax rates in this part of the country. This is evidenced across the Jackson-Stops network with the number of new applicants far outweighing new instructions in December in Bury St. Edmunds, Newmarket, Dorking, Northampton, Reigate and Sevenoaks.
“House prices are also holding steady, and growing in some local markets which has put the market on firm footing despite the UK’s economic outlook painting a mixed picture.”
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