The average price of a UK home listed on the market has dropped by 1.8% this month, equating to a £5,366 decrease, bringing the typical asking price down to £366,592, according to
property portal Rightmove.
This decline marks the second consecutive month of above-average price drops, surpassing the usual seasonal decrease of 0.8% for this time of year. Rightmove attributes this to a combination of pre-budget anticipation turning into post-budget disappointment, contributing to a steeper-than-expected seasonal slowdown as the holiday season approaches.
Despite the budget’s lukewarm reception, market activity remains more robust than last year, buoyed by optimism around the trajectory of interest rate cuts. This optimism is reflected in mortgage rates, which have started to ease. Rightmove predicts a 4% rise in average asking prices for new listings in 2024, although the market is expected to stay price-sensitive. Sellers face stiff competition, with listings at their highest levels in a decade.
While further reductions in mortgage rates are anticipated in 2025, the pace of cuts in the Bank of England’s base rate is expected to slow. This could delay the affordability improvements that prospective buyers have been waiting for.
Recent Bank of England data indicates signs of recovery, with mortgage approvals rising to 55,200 in January from 51,500 in December. However, concerns over potential rate hikes linger, leaving some buyers hesitant.
Tim Bannister, Rightmove’s director of property science, remains cautiously optimistic. “Market momentum is likely to continue into next year, particularly if mortgage rates fall to levels that improve affordability for those who’ve been holding off,” he said. “However, sellers must remain realistic with pricing to attract buyers in a market saturated with options.”
Rightmove’s projections align with other forecasts suggesting UK house prices will rise by 3% in 2025, followed by 3.5% growth in 2026 and 2.7% in 2027. By 2024, average prices could climb to £300,000, reflecting a £10,000 increase from current levels.
Regionally, London is expected to outperform other areas in 2025, marking the first time in a decade it has led house price growth. Estate agency Hamptons predicts a 4% annual increase for the capital during this period. While Hamptons’ short-term forecasts remain steady, its longer-term outlook has been tempered by high interest rates and taxation challenges.
The next year is likely to see further "twists and turns," Bannister added, emphasizing that the pace of mortgage rate cuts will play a critical role in determining market activity during key periods. Sellers will need to strike a balance, pricing competitively to attract buyers while inventory remains high.
With an uncertain economic backdrop and evolving mortgage rates, the UK housing market continues to be shaped by a mix of challenges and opportunities for buyers and sellers alike.
