Residential Sales Market Report - December 2024

End of year uplift

Despite December usually being a typically quieter month, the market is demonstrating resilience and optimism as we head into the new year, with expectations of continued house price growth and activity.

Return to growth

Starting the year in negative territory, the housing market has returned to price growth in 2024 due in part to relatively lower mortgage rates and growing incomes. The average house price rose by 3.7% in November compared to a year earlier, the fastest rate for two years (Nationwide).

While borrowing constraints will remain a challenge for many buyers in 2025, house prices are predicted to rise by 2.5% over the year with transaction levels increasing by 5% (Zoopla). The best market conditions are expected in regional markets with less affordability constraints. In the prime market, the average house price is £1,175,714, having softened by 7% year-on-year.

Mortgage metrics

The anticipated drop in interest rates earlier in the year translated into lower borrowing costs for home owners. From July to October, the lowest five-year fixed-rate mortgage dropped from 4.28% to 3.68%, while the lowest two-year fixed-rate declined from 4.68% to 3.84% (Moneyfacts). Although welcomed by home buyers, the recent Budget and anticipation that the Bank of England will cut interest rates more slowly than previously expected, make further mortgage rate cuts unlikely in the short term. In fact, rates have increased slightly since the Budget, to 4.14% and 4.22% respectively, with the best sub-4% deals disappearing. With swap rates stabilising around 4%, a return to ultra-low rates of the past ten years is not expected, but rates are expected to stabilise in 2025 which should bring reassurance to buyers.

Growing Confidence

Despite affordability challenges, market activity has been improving. Consumer confidence rose by 3 points in November, its first increase in three months, driven by lower interest rates, rising wages and eased tax concerns, and rebounding from October's pre-Budget dip (GfK Consumer Confidence Tracker). Lower mortgage rates than a year ago, along with a greater supply of homes on the market, have boosted confidence and affordability for aspiring and current homeowners to make their moves. There were 68,300 mortgage approvals in October, the highest level since August 2022 and the fifth consecutive monthly rise (Bank of England). The annual growth rate for net mortgage lending increased to 1.1% in October, up from 0.9% in September, continuing the upward trajectory seen since April 2024.

There were 100,410 transactions in October, a 10% rise on September's levels and the highest figure since November 2022 (HMRC). With stamp duty increases set for April 2025, the rise in transactions is likely to persist. Despite this data relating to the period before the Budget, the improving foundations of the housing market are clear. There have been some early signs of a post-Bank-Rate-cut uptick in buyer demand, though the usual seasonal Christmas slowdown is still anticipated (Rightmove).

*HM Treasury, Average of Independent Forecasts November 2024