What’s next for the housing market in 2025?

The residential property market is poised to enter 2025 with favourable indicators on supply and demand driving confidence and house price growth.

After such a turbulent few years for the sector, it’s time to welcome several key factors pointing to a more positive outlook.

Let’s consider the impact of events in the wider economy in 2024.

While cost of living pressures remain for many people, inflation was at long last brought down to levels in line with official targets. The Bank of England therefore began cutting interest rates. This, in turn, led mortgage lenders to reduce rates and offer more competitive deals.

With growth projections for the economy looking better than they were a year ago, we can assume the Bank’s rate cutting cycle will continue in 2025 and that mortgage lending activity will remain buoyant.

Market measures

Lower interest rates are great news for borrowers as they mean cheaper mortgages. At the same time, lower debt costs for home builders and developers create more scope to rekindle housing projects. Once you have a critical mass of completions, that creates a positive impact on supply.

And among the property-related measures announced in the Autumn Budget was an ambitious mandatory target of 1.5 million new houses over the next five years.

The Chancellor also signalled an increase in funding for local planning departments to hire more case officers to move applications along, clear backlogs and expedite approvals.

Supply-side boost

We also saw the introduction of a progressive new land classification: the ‘grey belt’. The intention is for local planning authorities to have to review their ‘green belts’ in more detail if they cannot meet housing targets on brownfield land. Such changes have generally been welcomed by developers as a means of ramping up supply.

There were also more incentives announced for green home building projects including favourable tax treatment for investing in green technologies and energy-efficient building practices.

And here in the Solent, we learned that we are one of seven areas across the country earmarked to share in a £45 million government investment designed to unblock stalled housing. The regional uplift should see more than 2,700 new homes built around the Solent and south Hampshire.

All this, coupled with a revised and imminent National Planning Policy Framework that compels local plans to allocate more land for development, should give grounds for optimism about market supply and therefore activity to come.

Media reaction

In the media, MoneyWeek and Business Insider are among titles currently offering commentary on the impact of the Budget and the benefits of lower interest rates for the residential property sector.

And The Guardian reports on the latest data from mortgage lender Halifax showing that the average price of a UK house has hit a record high after a fifth successive month of increases in property values.

Most commentators anticipate that average prices will rise further in 2025, albeit with regional variations.

We believe the key message for owners looking to sell is that there is indeed confidence and buoyancy in the market as we enter 2025.

Interest rates are easing steadily, there is the prospect of yet-lower mortgage rates and many buyers can look to enjoy greater affordability assuming the wider economy continues to stabilise and grow.

Knowledge and experience

In both Portsmouth and Southsea, our experience is that desirable, well-presented and properly marketed homes continue to sell and do well on price. Certainly, we see a healthy throughput of properties being listed.

A key point for all parties to be aware of is that Stamp Duty thresholds will revert back to their previous levels from 31 March 2025, so on transactions completing after that date, there will likely be more tax due. Some buyers might therefore push for price reductions to take into account the additional cost to them.

As always, the best advice is to work with an experienced and knowledgeable property agent who fully understands your needs and will help with all you need to know when it comes to your transaction.

If you are a homeowner, landlord, tenant or prospective seller or buyer, and want to discuss your next property move, we’re here to help.

Contact us on 02392 826731 or visit www.chinneckshaw.co.uk.

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