Oh, for a crystal ball! Our housing market predictions for 2025
General News | January 21, 2025 | Lizzie
General News | January 21, 2025 | Lizzie
How will the residential housing market fare in 2025? Will it be a year characterised by good or bad news for sellers, buyers, landlords, investors and renters? While we can’t claim to have a crystal ball in our office, here are some thoughts for the 12 months ahead.
As we said in our December 2024 market predictions blog, What’s next for the housing market in 2025?, there are favourable indicators on both supply and demand driving confidence and house price growth.
Lower inflation coupled with Bank of England’s base rate cuts have led mortgage lenders to reduce interest rates and offer more competitive fixed rate deals. Should the base rate cutting cycle continue, there is every chance that mainstream mortgage lending activity will remain buoyant.
That’s good news, especially if the wider economy is stable and growing as it means more affordability among borrowers.
At the same time, we need to factor in the upcoming changes to Stamp Duty and what conditions that may create for those looking to move.
We discussed the main threshold changes in our recent blog, Stamp Duty: Tempted to buy before the April rise?, and we see already that the market is experiencing some activity related to the end of the temporary reliefs introduced back in 2022. Rightmove says demand from buyers in London had already risen markedly towards the end of 2024, with feedback showing the looming 1 April deadline as a key reason. This view is supported by Robert Gardner, Nationwide’s chief economist, who is on record as predicting the changes are “likely to generate volatility, as buyers bring forward their purchases to avoid the additional tax”.
But it’s important for buyers and sellers to look at the wider picture and avoid a knee-jerk reaction.
A race against the clock to take advantage of a short-term tax discount has often misfired in the past. The reason: supply vs demand. If there is a stampede among buyers, it’s economic reality that prices will go up and therefore any saving made on comparatively lower Stamp Duty will evaporate.
Remember that Stamp Duty makes up only a small fraction of the overall purchase price so it could well be a false economy for a buyer to rush to complete a deal before April.
We believe mortgage rates will therefore continue to be the main determiner of market demand in the coming month.
Another trend tipped to gain prominence this year is the transfer of wealth to prospective buyers, especially first-timers, from the Bank of Mum and Dad. Analysis by equity release experts at Legal and General suggests that in 2024 almost half of under 35s who recently bought a home received financial help. L&G say the total value of Bank of Family gifts, so including transfers from grandparents and other relatives, hit £9.2 billion. This largesse supported 335,000 house purchases.
As for the rental market, all eyes are on progress with the government’s Renter’s Rights Bill. As we write, this is currently due to go before the House of Commons for its report stage and third reading.
Among other measures, the bill promises a ban on no-fault evictions and will force landlords to improve the energy efficiency of rental homes. However, there have been warnings from the National Residential Landlords Association. As we discussed in our blog in September 2024 In the news: housing sector reacts to Renters’ Rights Bill the Association claims landlords might respond with rent rises in high-demand areas such as city centres and coastal tourist hotspots. And it argues there could be a shortage of rental properties as landlords sell up. Again because of the law of supply and demand, this would have an obvious impact on those homes that remain in the sector.
Whether you are a homeowner, landlord, tenant or prospective seller or buyer, the best advice is to work with an experienced and knowledgeable property agent if you are looking to move or invest. At Chinneck Shaw, we’re here to help.
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