The housing market has had a busy start to the year as buyers rush to beat the drop in stamp duty thresholds and avoid higher property tax bills.
The latest Zoopla House Price Index for January 2025 shows new sales agreed are up 12% annually, while buyer demand has increased by 13%. This follows a recent report from Zoopla, which showed house prices rose two per cent in the year to December 2024 at £267,700, compared with a 0.9% drop in 2023.
Demand is also up by more than a third among first-time buyers, according to Zoopla’s latest House Price Index.
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It comes as homebuyers look to secure deals before the end of March when stamp duty thresholds are set to drop.
That is the fastest growth rate since April 2023, Zoopla said.
The highest growth in average house prices last year was in Northern Ireland, up 7.7%, according to Zoopla, followed by a 3.2% rise in the North West of England. This has been helped by rising wages.
But the research warns that house prices are rising more slowly in southern England, below 1.5%, where prices are above average and it is taking longer for rising incomes to help reset housing affordability.
Richard Donnell, executive director at Zoopla, said: “The first few weeks of each year tend to provide a clear indication of how the rest of the year is likely to unfold.
“2025 has started well, better than 2024 and 2023 which bodes well for market activity over the rest of the year, supported by evidence of more people looking to move.”
New year, new housing market
The property market as of January 2025 is markedly different to 2024.
Mortgage rates and inflation are lower and buyers are motivated to move as they look to beat the drop in stamp duty thresholds from April.
Currently, first-time buyers only start paying stamp duty once the value of a property purchase exceeds £425,000, while the threshold is £250,000 for home-movers.
But this will drop to £300,000 and £125,000 respectively from April, adding thousands of pounds to the cost of a home purchase.
Zoopla warned that it is now too late for buyers to agree and complete on a property purchase before the end of March 2025 in order to pay lower stamp duty.
But its research suggests that demand will continue, with an additional consumer survey showing 22% of renters and 17% of homeowners are looking to buy within the next two years.
Donnell added: “It is important not to read too much into the increase in stamp duty for more buyers from April as three in five first-time buyers will still pay nothing from April. The extra costs to homeowners remain manageable and unlikely to reduce sales but they will keep price rises in check.”
Will house prices rise in 2025?
The stamp duty rush is expected to boost house prices, at least in the first quarter of 2025.
There is then some uncertainty about what will happen to the market as stamp duty costs will be higher, but the market could also be boosted by further expected interest rate cuts and falling mortgage pricing.
Zoopla has forecast a 2.5% rise in house prices this year.
Donnell said: “Rising incomes and base rate cuts will improve affordability and support consumer sentiment.”
Estate agency brand Savills is more bullish, with predictions of 4% annual growth across the UK in 2025.
But others are more cautious.
Knight Frank has warned that there is still post-Budget uncertainty about tax rises.
It recently downgraded its forecasts for house price growth but still expects prices to rise by 2.5% in 2025, 3% in 2026 and 3.5% in 2027. This is down from estimates of 3%, 4% and 5% previously.
Tom Bill, head of UK residential research at Knight Frank, said: “Demand in the UK housing market feels artificially high.
“As well as the prospect of higher stamp duty from April, a number of borrowers are sitting on sub-4% mortgage offers that pre-date the Budget, which will support prices and transaction volumes in the first quarter of this year.
“As the impact of higher mortgage costs kicks, we expect a period of downwards pressure on house prices that will only be alleviated once rate cut expectations rise.”
