UK house prices concluded 2024 on a strong and optimistic note, recording a 4.7% year-on-year increase in December, according to the latest Nationwide House Price Index. This growth reflects the resilience of the housing market, which has managed to perform well despite ongoing affordability challenges and the impact of higher borrowing costs on potential buyers.
On a monthly basis, house prices rose by 0.7% in December, following an even more substantial 1.2% increase in November, with figures adjusted for seasonal factors. December often sees a slowdown in housing market activity as the festive season takes precedence for most households. However, this year, the market showed unexpected strength, continuing to defy predictions of stagnation during the typically quieter holiday period.
This upward trend in house prices underscores the continued demand for property across the UK, even as potential buyers face obstacles such as increased interest rates and a challenging economic backdrop. Analysts believe that a combination of limited housing supply and sustained interest from buyers has played a significant role in supporting price growth.
While affordability remains a pressing concern, particularly for first-time buyers, the property market has demonstrated remarkable stability. Many experts suggest that this resilience is indicative of the broader strength of the UK economy, which has managed to weather the challenges of 2024 better than anticipated.
As 2025 approaches, questions remain about whether this growth trajectory can be sustained. Much will depend on the direction of interest rates, the pace of new housing developments, and overall economic conditions. However, the housing market’s performance in 2024 has undoubtedly set a positive tone, providing a sense of optimism for both buyers and sellers in the months ahead.
“While house prices remain below the all-time high recorded in summer 2022, December’s performance demonstrates that the housing market is adjusting to the ‘new normal’ of higher but stabilising interest rates,” said Robert Gardner, Nationwide’s chief economist. This indicates that despite challenges, the market is adapting to the changing financial environment.
The market’s resilience can be largely attributed to a combination of easing inflation, improving mortgage rates, and robust employment levels. Mortgage rates remained around 4.5% throughout 2024, which is considerably higher than pre-pandemic levels, yet it didn’t stop the market from showing strength. Gardner also mentioned that despite these higher borrowing costs and affordability pressures, house prices grew by 4.7% annually, reflecting a solid level of resilience.
Holly Tomlinson, a financial planner at Quilter, highlighted that this annual growth in house prices is a testament to the market’s ability to cope with the ongoing challenges. “House prices grew by 4.7% annually, demonstrating a level of resilience despite the headwinds of higher borrowing costs and affordability pressures,” she explained.
Looking at regional trends, there remains a notable north-south divide in house price performance, with some regions outperforming others. Northern Ireland emerged as the best-performing region for the second consecutive year, seeing house prices rise by an impressive 7.1% throughout 2024, according to Nationwide data. Both Scotland and Wales also experienced solid growth, with prices increasing by 4.4% and 2.7%, respectively.
In England, the northern regions saw stronger growth than the southern areas. Northern England, which includes regions such as the North West, Yorkshire & The Humber, and the Midlands, saw a 4.9% annual increase. The North was the standout performer, with house prices up 5.9%. In contrast, the southern regions, including the South West, London, and East Anglia, experienced a more modest 2.2% rise, with East Anglia trailing with just a 0.5% increase.
“The north-south divide in house price growth remained pronounced in 2024, with more affordable regions in the North continuing to outperform the South,” Gardner commented. He also noted that the strong performance in Northern Ireland and Scotland could be attributed to their relatively lower average house prices and the strong local demand in these regions. This highlights how the affordability factor is playing a significant role in driving demand in these areas.
Policy impacts and outlook for 2025
Upcoming changes to stamp duty in April 2025 are expected to significantly influence market dynamics in the near term. Buyers may be motivated to complete transactions before the anticipated tax increase, potentially resulting in a surge in activity in early 2025. This spike in transactions would likely be followed by a slowdown later in the year, as many rush to finalise deals before the new rules come into effect.
“Stamp duty changes often create volatility in the market,” explained Robert Gardner, Nationwide’s chief economist. “We anticipate a surge in transactions in Q1 2025, especially in March, followed by a cooling-off period. This pattern makes it challenging to assess the underlying strength of the market during such periods.”
Looking further ahead, experts remain cautiously optimistic about the prospects for 2025. Gradual interest rate cuts by the Bank of England could help support housing demand, while wage growth may alleviate some of the affordability concerns that have been weighing on the market. Despite these positive signs, challenges persist, particularly for first-time buyers who are still grappling with high deposit requirements and elevated rental costs.
“Borrowing rates and affordability pressures will continue to weigh on the market,” said Nathan Emerson, CEO of Propertymark. “After the anticipated rush to beat the stamp duty deadline, we may see a calmer market, offering better opportunities for negotiation.” This may provide buyers with some breathing room as the market adjusts.
Holly Tomlinson, a financial planner at Quilter, echoed Emerson’s sentiment, emphasising the importance of careful financial planning in navigating the uncertainties that are expected to arise in 2025. While there are encouraging signs of market stabilisation, she highlighted the need for targeted measures to support first-time buyers. These buyers are crucial for revitalising activity at the lower end of the property ladder, where demand is most pressing. Without adequate support for this group, the broader market could struggle to regain momentum.
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