UK House Prices Experience First Decline in Nine Months

House Price Growth Slows Down

For the first time since March 2023, UK house prices fell in December 2024. According to Halifax, the average house price decreased by 0.2% from November, standing at £297,166. This marks a slowdown in house price growth, which had been increasing consecutively for five months prior.

Regional Variations in House Price Growth

The UK’s housing market is not uniform, and different regions have experienced varying levels of house price growth over the past year. Northern Ireland has shown the strongest annual house price growth, with prices rising by 7.4% to an average of £205,895. Wales saw a 4.6% increase in house prices, with properties costing £226,646 on average.

In contrast, Scotland’s annual house price growth was lower than the rest of the UK, at 2.4%, with an average price of £209,959. London retains its position as the region with the highest average house price, standing at £547,614, up 3.3% year-on-year.

Stamp Duty Changes and Their Impact on the Housing Market

Amanda Bryden from Halifax notes that "The housing market was broadly steady at the start of 2024, with house price growth taking off from the summer onwards." The changes to stamp duty from April, which will see the ‘nil rate’ band for first-time buyers shrink from £425,000 to £300,000, have motivated prospective first-time buyers to bring their home-buying plans forward.

Stamp duty applies in England and Northern Ireland. In London, only 8% of homes for sale will be stamp-duty free for first-time buyers from April, while 24% will be exempt in the south-east, and 32% in the east of England.

Looking Ahead to 2025

Bryden predicts 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, she believes that buyer demand should hold up relatively well, considering employment conditions don’t deteriorate, and house price growth is expected to be modest in 2025.

Market Analysis

Matt Thompson from Chestertons notes that December 2024 was one of the busiest Decembers in years in terms of buyer demand. This surge in demand was driven by first-time buyers keen to get on the property ladder before the stamp duty changes and second-steppers, including young families, wanting to upsize.

Ashley Webb from Capital Economics disagrees with the Halifax data, stating 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." This suggests that recent rises in mortgage rates may have started to weigh on the housing market more than previously thought.

Predictions for 2025

Webb’s views are not entirely pessimistic, as he believes house prices will rise by a healthy 3.5% in 2025 compared to the consensus forecast of 2.5-3.0%. His reasoning is based on his expectation that mortgage rates will fall further than most predict, reaching 4.00%.

Additional Data from Nationwide

Nationwide’s figures, which are based on mortgages it approves, show house prices rose more than expected in December and at the fastest annual rate since October 2022.