Halifax Reports Stagnant House Prices in June as First-Time Home Buyers Resurface
Modest House Price Growth Expected in UK for 2025
Despite the Bank of England's expected interest rate cuts and rising wages, the growth in UK house prices is forecast to be very modest, around 1-2%, in 2025[1][2][3]. This is due to several counteracting factors, including weak buyer demand, increased housing supply, and affordability constraints amid inflationary pressures.
Factors Influencing the Modest House Price Rise
The Bank of England's potential interest rate cuts could lead to a gradual decline in mortgage interest rates, improving borrowing capacity and supporting buyer demand. However, mortgage rates are likely to decline slowly and remain relatively high compared to earlier years due to persistent inflation[4].
Rising wages improve household purchasing power, potentially supporting demand for homes, especially among first-time buyers. Recent easing of mortgage affordability rules has already helped boost transactions, particularly among this group[2].
Buyer demand is up year-on-year (by 11%, according to Zoopla), but affordability issues, particularly in London and the South East, dampen stronger price growth in high-cost areas. Rising supply of properties (up 12%) offers buyers more choice, contributing to a buyers’ market dynamic[3].
Growing listings and seller competition put downward pressure on price growth and have prompted forecast revisions from Savills and Rightmove from around 4% down to 1-2% growth estimates for 2025[1][2][3].
Lingering uncertainty related to geopolitical issues and tax policy expectations weigh on buyer confidence, further limiting robust price increases[1].
Regional Disparities
Regions like Wales, the Midlands, North, and Northern Ireland are expected to see relatively healthier price growth (2-3%), while London and the South East face stagnation or weaker growth due to higher stamp duty and affordability issues[3].
Current Market Conditions
The average cost of a home in the UK is currently £296,665, a decrease of £117 from the previous month[5]. House prices stagnated in June, following a drop of 0.3% in May[6].
Despite these challenges, the housing market has received a boost due to rising wages easing affordability pressures[5]. The Bank of England is also expected to cut rates again this year[7].
Ashley Webb, economist at Capital Economics, believes the housing market remains slow to recover, while Guy Gittins, CEO of Foxtons, expects market activity to continue to strengthen in the second half of the year[1][7].
References:
[1] Zoopla Press Release
[2] Rightmove Press Release
[3] Savills UK Housing Market Forecast
[4] Bank of England Monetary Policy Report
[5] Halifax House Price Index
[6] Nationwide House Price Index
[7] Bank of England Interest Rate Decision
- The expected interest rate cuts by the Bank of England might lead to a decline in mortgage interest rates, resulting in improved borrowing capacity for potential home buyers.
- Despite rising wages, affordability constraints amid inflationary pressures, weak buyer demand, and increased housing supply are counteracting factors that may limit personal finance opportunities in the UK housing-market for 2025.
- The newsletter from Savills UK Housing Market Forecast revised its growth estimates, predicting a modest 1-2% increase in property prices in the UK for 2025.
- Investors looking for real-estate opportunities should consider regions like Wales, the Midlands, North, and Northern Ireland, which are expected to experience relatively healthier price growth (2-3%) in comparison to London and the South East.
