The property market has fared better than the initial forecasts for 2024, with stronger than anticipated signs of sustained recovery and resilience, according to The Guild of Property Professionals.
The trade body points to aspects such as inflation being brought under control and the bank rate on a downward trend, as having provided increased certainty for buyers, resulting in a rebound in market activity and a return to price growth.
At the start of 2024, CPI inflation was at 4% and has steadily decreased towards the 2.0% target. While inflation was higher than expected at 2.3% in October, it is forecast to remain close to the target in 2025. November also saw the Bank of England reduce the interest rate from 5% to 4.75%, a welcome optimism boost for the housing market. The consensus is that the interest rate will remain on its downward trajectory and is projected to drop to 4% or lower by the end of next year.
“The combination of stabilising inflation and declining interest rates has provided a welcome boost to the property market,” said Iain McKenzie, CEO of The Guild of Property Professionals. “Buyers are regaining confidence, which has resulted in increased activity and price growth.”
While the latest cut did not flow through to fixed mortgage rates, it gave a further boost to sentiment and rates are still lower than a year ago. The average two- and five-year fixed-rate mortgages are currently at 5.08% and 4.85% respectively, showing a year-on-year decrease of -0.47% and -0.28%.
The next Bank Rate cut should further boost optimism amongst movers and help to improve affordability through 2025, the Guild said.
According to the Bank of England, mortgage approvals in October reached 68,303, the highest level since August 2022, as market activity builds. This marks a 42% year-on-year increase, and a 3% rise compared to October 2019.
Sales activity has been given a boost, driven by a mix of first-time buyers and existing homeowners who had delayed their moving decisions until borrowing costs declined and the outlook improved.
An improving economic outlook and greater buyer certainty have contributed to a healthy level of demand, with the number of people contacting agents about homes for sale 17% higher compared to the same time last year.
Sales activity has bounced back from the lows of last year and continued an upward trajectory, with sales agreed surpassing both 2023 and 2019 levels. HMRC reported 100,410 transactions in October, the highest level since November 2022.
According to Zoopla data, first-time buyers are on track to be the largest buyer cohort in 2024, making up 36% of all sales. This is followed by existing homeowners with a mortgage (31%), while cash buyers, consisting of mortgage-free homeowners and investors, are on track to make up 27% of sales. Investors using buy-to-let mortgages are expected to make up the balance, their numbers impacted by rising mortgage rates.
In the autumn Budget it was confirmed that stamp duty thresholds in England would return to previous levels from 1st April 2025, meaning the exemption limit for first time buyers drops from £425,000 to £300,000. That will mean only around 8% of the homes for sale in London would be stamp-duty free for first-time buyers, 24% in the South East and 32% in the East of England.
McKenzie notes that the upcoming changes to stamp duty thresholds are influencing buying decisions, creating a sense of urgency in the market. Rightmove data shows an uptick in first-time buyer demand in higher-priced areas of the country, as they rush to beat the April deadline.
Despite affordability challenges, house prices have shifted from negative to positive annual growth, exceeding expectations for 2024. At the start of the year, the consensus forecast was for a decline in house prices of -1.1% over 2024. However, in September the average house price reached £291,828, a 2.9% year-on-year increase, marking the strongest annual growth rate since February 2023.
All regions, except London, are experiencing positive annual price growth, with the highest increases in the North East and Northern Ireland leading with growth rates of 6.5% and 6.2% respectively.
“While London lags behind in terms of annual price growth, the rest of the UK is demonstrating robust resilience,” McKenzie commented. “Looking ahead, price growth is expected to build, with consensus forecasts for price growth at 3.4% in 2025 and 4% in 2026.”
Despite strong demand, the market remains price-sensitive because the number of homes for sale per agent has reached its highest level since 2014. Both the number of new properties being listed and the time they take to sell are increasing, contributing to the rise in available homes for sale. This has created a buyers’ market, where well-presented, competitively priced homes are key to attracting interest.
“The abundance of choice for buyers means sellers must be strategic in pricing and presentation to stand out,” McKenzie advised. “For those looking to move, the current market conditions offer an excellent opportunity to capitalise on renewed activity and buyer enthusiasm.”
As 2025 approaches, the property market is poised for continued recovery, supported by strong buyer demand, improving affordability, and favourable economic conditions.
