UK house prices are expected to rise by 2.5% in 2025, according to Zoopla’s latest housing market report, with sales volumes forecast to increase by 5% to 1.15 million.
This follows a stronger-than-expected performance in 2024 despite the economic impact of Labour’s first Budget.
2024 rebound paves way for growth
The market returned to positive growth in 2024, with UK house prices increasing 1.5% year-on-year by October. Northern Ireland led with 6.3% growth, followed by the North West (2.9%), while southern regions saw subdued gains below 1% due to ongoing affordability challenges.
Zoopla attributes this resilience to rising household incomes, which grew by 15% between Q2 2022 and Q2 2024, offsetting higher mortgage rates and reducing affordability pressures without significant price falls.
2025: Modest growth ahead
Zoopla expects house prices to rise by 2.5% in 2025, assuming mortgage rates settle around 4.25%. Price growth will continue to favour regions outside southern England, where affordability remains strained.
The north-south divide will persist:
- Fastest gains expected in areas such as Wigan (+3.9%), Oldham (+3.7%), and Belfast (+6.5%).
- Modest price declines projected in southern markets like Ipswich (-1.1%), Truro (-1.2%), and Dartford (-1.2%).
Sales volumes on track for 5% growth
Sales completions are predicted to rise to 1.15 million in 2025, supported by:
- A 30% larger sales pipeline than last year;
- Strong first-time buyer activity, the largest buyer group driving chains;
- Improved affordability from rising incomes and falling mortgage rates.
Key trends shaping the market
- Affordability reset: Rising incomes, rather than price falls, have improved affordability, helping buyers adapt to higher borrowing costs.
- First-time buyers dominate: New buyers remain central to sustaining transaction chains.
- Shift in value focus: Homeowners seeking affordability are increasingly looking further afield, boosting activity in northern regions.
Richard Donnell, Zoopla’s Executive Director, comments:
“The housing market has shown surprising resilience in 2024. Rising incomes and lower mortgage rates have stabilised affordability, supporting house price growth and increasing sales.
“While affordability in southern England remains stretched, we expect house price inflation to continue leading in northern markets and other affordable areas. Existing homeowners will need more support, particularly as more buyers look further afield for better value.”