House prices and property sales are predicted to rise in 2025, with both house prices and sales volumes predicted to grow, according to the latest House Price Index from Zoopla. Despite headwinds from the Autumn Budget and ongoing economic uncertainty, rising incomes and stabilising mortgage rates are set to support increased activity in the property sector.
House prices and sales on the rise
Zoopla reports that the average UK house price currently stands at £267,200, reflecting a 1.5% annual increase over the past 12 months—equating to an additional £3,900 for the average property. The housing market saw positive growth across all regions and countries of the UK in 2024, with Northern Ireland leading the way with a 6.3% increase, followed by the North West at 2.9%.
Sales are also on the up. Zoopla predicts a 5% rise in sales completions in 2025, with 1.15 million transactions expected. The pipeline for early 2025 is particularly strong, with a 30% larger backlog of sales compared to the same period last year.
“Postponed home moves, changing working patterns, and rising running costs continue to influence the decisions of homebuyers,” said Zoopla’s Executive Director Richard Donnell. “First-time buyers remain the largest group, supporting housing chains and helping existing homeowners to move.”
Income growth improves affordability
One of the driving factors behind the market’s resilience has been robust income growth. Data from the Office for Budget Responsibility (OBR) shows household disposable incomes have risen 15% between 2022 and mid-2024, helping to offset the impact of higher borrowing costs.
This trend has allowed housing affordability to reset without the need for significant price drops. While Zoopla previously reported that UK homes were overvalued by 16%, the combination of rising incomes and falling mortgage rates has corrected this imbalance. The average mortgage rate is forecast to stabilise at 4.25% in 2025, enabling house prices to grow by an estimated 2.5% over the year.
“The housing market has been resilient in the face of higher borrowing costs,” Donnell explained. “Higher income growth and lower mortgage rates have helped reset housing affordability faster than many expected over 2024.”
Regional disparities remain a challenge
The persistent north-south divide in housing affordability is expected to continue into 2025. Affordability pressures are most acute in southern England, where income-to-buy ratios remain high, limiting house price growth.
In contrast, regions like the Midlands, Northern England, Scotland, and Wales are projected to outperform the national average. Local hotspots for price growth include Oldham (3.7%), Wigan (3.9%), and Belfast (6.5%), while areas like Ipswich (-1.1%), Truro (-1.2%), and Dartford (-1.2%) are still experiencing slight price declines.
Zoopla emphasises that incomes will need to grow faster than prices in southern regions to improve affordability and drive demand.
A competitive 2025 for buyers and sellers
Looking ahead, the market is shaping up to be competitive in 2025, with factors such as stamp duty changes in April and pent-up demand driving activity.
Matt Thompson, Head of Sales at Chestertons, highlighted the early signs of a busy start to the year:
“We are already seeing more buyers entering the market, which is not typical for this time of year. This strong activity is largely driven by first-time buyers looking to get on the property ladder before the stamp duty changes in April 2025.”
Thompson added that while more properties are coming to market, the imbalance between supply and demand will likely result in multiple offers for many homes, especially in sought-after locations like London. He predicts property values in the capital could rise by up to 3% in 2025.
What does this mean for the market?
The UK property market appears poised for steady growth, supported by rising incomes, easing mortgage rates, and sustained buyer demand. However, challenges remain, particularly in addressing regional disparities and ensuring affordability in high-demand areas.
For buyers, the competition will be fierce, but lower interest rates and stabilising prices offer opportunities. For sellers, the outlook remains positive, with strong demand expected to support asking prices.
With the housing market showing resilience despite economic pressures, the coming year will test whether these trends can continue and whether policy changes, such as the stamp duty adjustments, will further influence market dynamics.
