Residential property prices rose by a stronger-than-expected 0.4% in February compared with January, according to data published at the end of last week by Nationwide.
The increase was stronger than all forecasts in a Reuters poll of economists which had pointed to a 0.2% monthly rise after January’s increase of 0.1%.
Several measures of Britain’s housing market have shown a recovery in demand, helped by falling borrowing costs and also by buyers moving quickly before a tax incentive on the purchase on some homes expires at the end of March.
Nathan Emerson, CEO of Propertymark, said: “Year on year it is positive to see progression within the housing market, and it is encouraging to see momentum continue as we head further into 2025. There are still aspects to be mindful of, however, such as how inflation could influence future base rate decisions and what effect on affordably that could have.
“With inflation now sitting at 3 per cent, which is above the Bank of England’s initially targeted level, we could see it becoming potentially more challenging for people to approach the buying and selling process should this translate into higher interest rates as a result.”
Jonathan Handford, Managing Director at national estate agent group Fine & Country, described the latest hike in house prices as “the calm before the storm” with stamp duty changes on the horizon.
He notes: “Many buyers — especially first-time purchasers and landlords — are rushing to secure deals before the tax increase takes effect. For those entering the property market, the looming rise in upfront costs makes the current window crucial. Locking in a purchase now could mean significant savings, particularly for those stretching their budgets to afford a home.
“Adding fuel to the fire, the Bank of England’s decision to cut the base rate to 4.5% in February — which should also translate into lower mortgage rates — has made borrowing cheaper, injecting momentum into early 2025.
“This urgency is evident in the £848m paid in stamp duty in January, a £40m rise from the previous year, according to HMRC data. Meanwhile, Zoopla’s latest House Price Index shows the number of sales agreed was 10% higher in January, and the number of homes for sale was up 11% compared to a year ago.
‘But rising house prices aren’t good news for everyone. While the market is active, the affordability gap continues to widen. Higher house prices, driven by increased demand and lower mortgage rates, mean many buyers could struggle to find homes within their budget, despite lower borrowing costs.
“Economic headwinds could also complicate the picture. CPI inflation has ticked back up to 3%, potentially delaying further interest rate cuts and keeping household budgets under pressure. While lower rates are a win for borrowers, persistent inflation could force the Bank of England to pause or slow future reductions, limiting affordability improvements in the long run.
“With a heated market, looming tax changes, and economic uncertainty, the coming months will be crucial. If borrowing costs remain favourable and inflation stabilises, buyer confidence could hold steady — but if affordability worsens, the housing market may face fresh challenges as 2025 unfolds.”
The CEO of Yopa, Verona Frankish, added: “The UK property market has begun the year on the front foot and we’re now seeing the rate of house price growth start to accelerate, as more buyers push on with their plans to purchase following a brief respite over the Christmas period.
“A degree of this increased activity in recent months has, of course, been spurred by the impending stamp duty deadline at the end of March, with those making their move keen to reach completion and avoid any increased cost when buying.
“However, we’ve seen the vast majority of buyers take the potential stamp duty cost increase into consideration before submitting their offers, so whilst there may be a momentary market correction, we expect momentum to continue building beyond 1st April.”
