The property market picked up pace in 2024, largely thanks to a dip in mortgage rates. Nationwide's house price index showed that the average property value in the UK rose by 4.7% over 2024 to a record £269,426 - in the strongest rate of annual inflation since October 2022.
However, the money that people are making from the sale of their homes has been shrinking since the market's peak in 2022. In 2024, the average gain made on a property in England and Wales (the difference between the purchase price and the proceeds received at sale before costs), was £91,820. These sellers had owned their home for an average of 8.9 years.
In 2023, the average gain was £102,650; in 2022, it was £112,930, hitting six figures for the first time.
The profits from sales generally fuel moves up the property ladder. But this progress is being impeded by a mix of the lower gains and relatively high mortgage rates. Flat owners are facing a particular challenge.
The gains made in London remain still the largest of any region. But they are being reduced by slower house price growth over the past decade: property values in some areas of the city are below where they stood 10 years ago.
In 2024, the average gain in the capital was £172,350; this was the first time since 2015 that the figure in London fell below £200,000. The average gain was 44% more than the purchase price, although substantially below the average 100% profit scored at the market's peak in 2016. In the South East and the South West, the average seller saw a 41% uplift in value when selling their home last year.
Attention is now turning to the impact of the withdrawal of the stamp duty concessions with effect from April 1. A person moving home will pay an extra £2,500 in tax when the threshold is reduced from £250,00 to £125,000.
But first-time buyers face a potential increase of up to £11,250, since the starting point at which they are liable for this tax will be lowered from £425,000 to £300,000 (stamp duty at the rate of 5% will be charged on the portion between £300,001 and £500,000).
First-time buyers' purchasing power is set to be reduced, with those buying more expensive homes in London and the South hardest hit.
Consequently, there’s been an uptick in first-time buyers agreeing to buy higher value properties in a bid to complete before the April deadline. First-time buyers purchased a record 20.8% of +£425,000 homes sold in November and December, compared to 17.5% for the whole year and up from 14.5% in 2023.
But anyone aspiring to exchange and complete before March 31 is probably already too late. At present it takes an average of 119 days between an offer on a property being accepted and the completion of the deal.
"The profits from sales fuel moves up the property ladder. But this progress is being impeded by a mix of lower gains and relatively high mortgage rates. "
Only 13% of transactions are completed within two months, and a mere 6% within one month. Buyers with ample resources, particularly those buying in cash, are almost twice as likely to beat the March 31 deadline.
In advance of concessions ending, buyers have been negotiating larger discounts, while sellers have been trimming their asking prices. In the wake of the Autumn Budget which confirmed the stamp duty changes, the average discount secured was £3,000 higher than the average earlier in the year.
In response to the Budget measures, financial markets are now pricing in two 25 basis point cuts to the bank base rate this year. In the summer of 2024, the Bank of England was expected to order four.
The expectation that the rates would stay higher for longer caused the cost of mortgages to jump in December. But lenders are now competing more heavily for business which has produced some cheaper offers.
"Our view is that financial markets are still being too pessimistic, and that there is still room for rates to fall this year. "
Our view is that financial markets are still being too pessimistic, and that there is still room for rates to fall this year. The lower than expected inflation figures out in January will have helped.
By the end of the year, we expect more sub-4% mortgage deals to be offered, particularly for borrowers with substantial deposits. But house prices are likely to be a little higher.
As stability returns to the economy and affordability conditions improve, more people should start moving home. We are forecasting house price growth of 3% for Great Britain in 2025, with London leading the way as the market's recovery from peak mortgage rates steps up a gear.