The UK housing market has experienced a slowdown in December 2024, with house prices falling for the first time since March. This development comes as experts expect sales to increase over the next few months ahead of stamp duty changes.
Average House Price Drops by 0.2%
According to Halifax, the average house price in the UK dropped by 0.2% from November to £297,166. This marks a significant slowdown after five consecutive monthly increases. On an annual basis, prices were up 3.3%, down from 4.7% growth in November.
Regional Variations in House Price Growth
While house price growth varies across the UK, some regions have experienced stronger annual growth rates than others:
- Northern Ireland: With a 7.4% year-on-year increase, Northern Ireland showed the strongest annual house price growth in the UK, with an average property price of £205,895.
- Wales: House prices in Wales rose by 4.6% year-on-year, with properties costing an average of £226,646.
- Scotland: The annual rate of house price growth was lower than in the rest of the UK at 2.4%, with an average property price of £209,959.
London Retains Highest Average House Price
Despite the slowdown in other regions, London retained the highest average house price across the country, rising by 3.3% year-on-year to £547,614.
Expert Insights: A Steady Market and Future Projections
Amanda Bryden, of Halifax, noted that the housing market was broadly steady at the start of 2024, with house price growth taking off from the summer onwards.
"In the latter half of the year, house prices grew in response to falls in mortgage rates, alongside income growth, both leading to financial pressures somewhat easing for buyers," Bryden said.
She added that changes to stamp duty from April have given prospective first-time buyers more motivation to get on the housing ladder and bring any home-buying plans forward. Stamp duty applies in England and Northern Ireland.
First-Time Buyers and Stamp Duty Changes
Stamp duty will shrink the ‘nil rate’ band for first-time buyers from £425,000 to £300,000 from April. As a result, only 8% of homes for sale in London will be stamp-duty free for first-time buyers from April.
Some 24% of homes will remain stamp-duty free in the south-east, and 32% in the east of England.
Looking Ahead: Modest House Price Growth Expected
Bryden said that mortgage affordability will remain a challenge for many, especially as the Bank of England base rate is likely to come down more slowly than previously predicted.
"However, providing employment conditions don’t deteriorate markedly from a more recent softening, buyer demand should hold up relatively well and, taking all this into account, we’re continuing to anticipate modest house price growth this year," Bryden said.
A Contrasting View: Mortgage Rates and House Price Growth
Matt Thompson, head of sales at the estate agent Chestertons, observed that December 2024 was one of the busiest Decembers in years in terms of buyer demand. This was driven by first-time buyers who were keen to get on the property ladder before this year’s changes to stamp duty but also by second-steppers, including young families, wanting to upsize.
In contrast, Ashley Webb, UK economist at Capital Economics, said that the 0.2% m/m fall in the Halifax house price index in December is at odds with the 0.7% m/m rise in the Nationwide measure and suggests that recent rises in mortgage rates may have started to weigh on the housing market at the end of last year a bit more than previously thought.
Separate Figures Show House Price Growth
Separate figures by the lender Nationwide, which are based on mortgages it approves, showed house prices rose more than expected in December and at the fastest annual rate since October 2022.
As the UK’s housing market continues to evolve, one thing is clear: the upcoming changes to stamp duty will have a significant impact on first-time buyers. With only 8% of homes for sale in London set to be stamp-duty free from April, prospective buyers must weigh their options carefully.
While some experts predict modest house price growth this year, others believe that mortgage affordability challenges will continue to impact the market. As we move into 2025, one thing is certain: the UK’s housing market will remain a complex and dynamic landscape.
