The UK housing market continues to demonstrate a mixture of cautious optimism and affordability challenges as we move through the final quarter of 2024. The key trends observed include a modest rise in house price inflation, an impressive surge in sales activity, and a shift in the profile of homebuyers, with first-time buyers (FTBs) making up a significant portion of transactions.
- UK House Price Inflation: 1.0% year-on-year (up from -0.9% in 2023).
- Sales Activity: The number of sales is at its highest since the 2020 boom, driven by a competitive mortgage market.
- Sales Pipeline: At £113bn, the sales pipeline has grown by 30% compared to October 2023.
- First-time Buyers: Representing 36% of all sales in 2024, FTBs are now the largest buyer group.
UK 2024 Housing Market Overview:
The housing market in 2024 has shown significant recovery, mainly driven by falling mortgage rates and rising incomes. The competition among lenders has resulted in the lowest mortgage rates in two years, boosting buyer confidence and leading to the highest level of sales since the post-pandemic boom in 2020.
However, house price inflation has been more restrained, showing an increase of only 1% over the last 12 months up to September 2024, compared to a decrease of 0.9% in the same period last year. This reflects a mixed environment of growing sales activity but slower price growth.
While home prices are rising in regions with more affordable homes, like the North East (2.0%) and Scotland (2.4%), some southern areas, such as the South East, have seen slight declines in house prices (-0.1% in September).
Despite these regional variations, UK house prices are forecasted to end 2024 with a modest 2% increase, as the effect of price falls from late 2023 drop out of the annual calculations.
Strong Property Sales Pipeline:
A significant driver of the market’s performance is the robust sales pipeline. As of October 2024, there are an estimated 306,000 homes with a sale agreed, marking a 26% increase compared to a year ago. This surge reflects a recovery from the mortgage rate spikes of 2023 and points to sustained growth through the rest of 2024.
The total value of homes in the sales pipeline now stands at £113bn, which is 30% higher than the same period in 2023. This positive momentum in sales is expected to continue into December, with many of these sales expected to complete in the first half of 2025.
First-Time Buyers:
First-time buyers (FTBs) are the largest group of purchasers in 2024, accounting for 36% of all sales. This marks a significant shift, as FTBs were previously overshadowed by other buyer groups. The growth in FTB activity has been fuelled by the decrease in mortgage rates and the increasing affordability of homeownership compared to renting.
In fact, mortgage repayments for FTBs are now 17% cheaper than renting, a significant improvement from just 2% a year ago. This shift in affordability dynamics is helping FTBs get a foot on the property ladder.
Additionally, a number of landlords are selling properties, particularly in London, which further supports the first-time buyer market. The average asking price of these formerly rented homes is significantly lower (around £307,000) compared to the overall UK average asking price of £365,000.
Stamp Duty Relief and Potential Changes:
A notable feature of the 2024 housing market is the impact of stamp duty relief for first-time buyers in England and Northern Ireland. Currently, 80% of FTBs pay no stamp duty on homes priced up to £425,000. However, this relief is set to return to lower thresholds in 2025, potentially affecting 20% of FTBs who would then face stamp duty charges. This could have a cooling effect on the market, especially in high-value areas like London, where some FTBs might face an additional stamp duty burden of up to £15,000.
The Rental Market and Housing Affordability:
The dynamics between renting and buying have significantly shifted. As rent prices continue to rise—up by 5% over the past year—many renters are finding that buying is becoming more attractive, especially with the dip in mortgage rates. However, the rental market remains under strain, with a lack of supply pushing rents higher, particularly in lower-income brackets. This scarcity of rental properties has had a direct impact on the housing sales market, with a higher turnover of rental properties becoming available for sale.
Property Market Outlook for 2025:
The outlook for the housing market in 2025 remains cautiously optimistic, with house price growth expected to remain modest. The key drivers of this market will be continued wage growth and mortgage rates stabilizing at their current levels of 4%-4.5%. The success of the housing market in the coming year will depend heavily on broader economic factors, particularly the government’s fiscal policies and investments in new housing supply.
The UK housing market in 2024 has seen a notable rebound, with strong sales activity, a healthy sales pipeline, and a shift in buyer demographics. First-time buyers are taking a leading role, supported by more affordable mortgage rates and changes in the rental market. However, ongoing affordability challenges, along with potential changes to stamp duty relief, may pose challenges to sustaining this growth in the long term.
As we move into 2025, the focus will likely be on maintaining market stability through strategic fiscal policies and measures to address the housing supply shortage, all while monitoring the impact of economic factors like wage growth and inflation on buyers’ purchasing power.