Zoopla’s latest housing market forecast for 2025 predicts continued recovery and growth, with house prices and sales volumes set to rise, despite economic challenges posed by Labour’s Budget.
Here are the key takeaways:
Resilient growth despite headwinds
- House Prices: UK house prices grew by 1.5% in 2024, with Northern Ireland (6.3%) and the North West (2.9%) seeing the fastest gains. Southern England remains subdued, with growth below 1%, reflecting ongoing affordability pressures.
- Sales Volumes: An estimated 1.1m sales were completed in 2024, a 10% increase year-on-year. This momentum is set to continue, with sales projected to rise by 5% in 2025, reaching 1.15m transactions.
Key drivers of the 2025 housing market
- First-Time Buyers Leading the Market: First-time buyers will remain the largest group, supporting housing chains and helping existing homeowners move.
- Income Growth Resetting Affordability: Household disposable incomes rose 15% between mid-2022 and mid-2024, outpacing house price growth and helping affordability recover faster than expected.
- Mortgage Rates Stabilising: With rates projected to average 4.25% in 2025, affordability will improve, enabling modest price growth of 2.5% nationally.
Regional disparities remain prominent
- North-South Divide: Affordability outside southern England continues to support stronger growth. Key areas of growth include:
- Oldham (OL): 3.7% growth
- Wigan (WN): 3.9% growth
- Belfast (BT): 6.5% growth
- Southern England Lagging: Modest price declines are still evident in some southern areas:
- Ipswich (IP): -1.1%
- Truro (TR): -1.2%
- Dartford (DT): -1.2%
Forecasted challenges
- Affordability Pressures in Southern England: Continued high income-to-house price ratios mean slower recovery in these areas.
- Changing Buyer Preferences: Homebuyers are increasingly looking further afield to secure better value, particularly in commuter-friendly regions.
Zoopla’s 2025 predictions
- House Prices: Expected to grow 2.5% nationally, with affordability improving as incomes rise.
- Sales Volumes: Increased by 5%, driven by first-time buyers and a larger sales pipeline.
- Regional Growth: Northern regions and Northern Ireland will outpace southern England, continuing the affordability-led north-south divide.
Expert insights
Richard Donnell, Executive Director at Zoopla, comments:
“The housing market has demonstrated remarkable resilience in the face of higher borrowing costs. 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.”