1. THE NUMBER OF NEW HOMES BUILT TO HIT ROCK BOTTOM
In the 10 years to 2020, new home starts and completions have been averaging 160,000 per year or about 13,000 a month. Over the past two years, however, the number of new starts has averaged just 10,600 homes a month (excluding the rush in Q2-2023 to beat changes to building regulations). Given it takes around 18 months to build a home from the ground up, there’ll be an almost 40,000 reduction in the number of homes completed per year, over at least the next two years. To meet the government’s goal of 1.5 million homes over this parliament, starts would need to hit 25,000 a month, 2.5x the current amount.
2. MORTGAGE PAIN EASES FOR MANY
The summer of 2025 may mark a point of relief for those rolling off 2-year fixed-rate mortgages. Mortgage rates peaked back in 2023, with rates averaging over 5% on a typical 75% LTV 2-year fix for eight of the 12 months. Some 1.6 million fixes came to an end in 2023. Given that rates have been falling since then, most of this group will see their mortgage payments fall when they remortgage in 2025. This should ease the pressure on those hardest hit by interest rate hikes, leaving them with more after paying their mortgage. Offsetting this are those with expiring 5-year fixed rate mortgage rates who will see a sizable jump in monthly payments, but a smaller increase than they would have seen in 2024.
3. SDLT HIT FOR FIRST-TIME BUYERS IN THE SOUTH
Higher rents and easing mortgage rates meant that FTBs purchased a record 49% of homes sold in London in 2024. However, with a SDLT hike on the horizon, FTB purchase numbers in the South may fall back a little next year. Or indeed, they may be forced to look at cheaper homes. The average London FTB purchasing a £454,000 home will see their stamp duty bill increase from £1,450 to £7,700 from 1st April 2025. Assuming this extra £6,250 came out of their deposit, this could reduce their purchasing power back to 2015 levels, when the average FTB paid £48,000 less for a home.
4. HARDER FOR LOWER EARNERS TO FIND SOMEWHERE TO RENT
By the end of 2024, rents are likely to have risen by 4.5% across Great Britain. However, it has been the price of the smallest, most affordable homes that have risen fastest as affordability pressures mount. With the Renters' Rights Bill likely to extend eviction timelines, landlords may become increasingly cautious about tenant selection. Tenants who don't meet increasingly stringent affordability criteria, have bad credit ratings or can’t offer a homeowning guarantor may increasingly struggle to find a place to rent.
5. GENERATIONAL WEALTH TRANSFERS CONTINUE RAMPING UP
Demographics and the rising homeownership rates after the Second World War mean the number of homes being passed on has steadily risen over the last couple of decades. But recent tax changes, including the government’s tweaks to inheritance tax, could mean that wealth transfers before death become more commonplace. While the increase will be unwelcome by those inheriting in the traditional sense, for those with seven years to plan ahead, moving assets and pensions in a bid to mitigate inheritance tax may increase. Often, these transfers are made to help younger generations purchase their first home.