The UK housing market is set for another year of recovery in 2025, with both house prices and sales volumes expected to rise, according to Zoopla’s latest housing market forecast, despite continued economic uncertainty following Labour’s Budget.
Zoopla said the market has shown notable resilience through 2024, with UK house prices rising by 1.5 per cent over the year. Growth has been led by more affordable regions, particularly Northern Ireland, where prices increased by 6.3 per cent, and the North West, which recorded growth of 2.9 per cent. By contrast, much of southern England has seen price growth of below 1 per cent as affordability pressures continue to weigh on demand.
Sales activity has also strengthened. An estimated 1.1 million transactions were completed in 2024, representing a 10 per cent increase year on year. Zoopla expects this momentum to carry into 2025, with sales forecast to rise by a further 5 per cent to around 1.15 million transactions.
First-time buyers are expected to remain the dominant force in the market next year, providing crucial support to housing chains and enabling existing homeowners to move. Zoopla said stronger income growth has played a central role in resetting affordability. Household disposable incomes rose by 15 per cent between mid-2022 and mid-2024, significantly outpacing house price growth and helping buyers absorb higher borrowing costs more quickly than anticipated.
Mortgage rates are also expected to provide a more stable backdrop. Zoopla forecasts average mortgage rates of around 4.25 per cent in 2025, which should support modest national house price growth of approximately 2.5 per cent over the year.
However, regional disparities are expected to remain a defining feature of the market. Affordability continues to favour areas outside southern England, with towns such as Oldham, Wigan and Belfast expected to see above-average price growth. Meanwhile, some southern markets are still experiencing modest price falls, including Ipswich, Truro and Dartford, reflecting stretched income-to-house price ratios.
Zoopla said buyer behaviour is also shifting, with households increasingly willing to look further afield for better value, particularly in commuter-friendly locations where prices remain more accessible.
Richard Donnell, executive director at Zoopla, said the market’s performance has defied expectations. “The housing market has demonstrated remarkable resilience in the face of higher borrowing costs,” he said. “Faster-than-expected income growth and stabilising mortgage rates have reset affordability, leading to increased sales and house price growth. However, southern England will continue to trail, with incomes needing to grow faster to sustain a meaningful recovery.”
Overall, Zoopla expects 2025 to be another year of steady, affordability-led growth, with northern regions and Northern Ireland continuing to outperform southern England as buyers prioritise value and financial resilience over location alone.
