UK house prices drop for first time in nine months

London: So, it looks like UK house prices took a little dip in December 2024, marking the first drop since March. Experts think sales might pick up soon, especially with some stamp duty changes coming up.

The average house price now sits at £297,166, which is a slight drop of 0.2% from November. It’s interesting because prices had been climbing for five months straight before this. Year-on-year, though, prices are still up by 3.3%, just not as much as the 4.7% growth we saw in November.

Northern Ireland is actually leading the pack with a 7.4% increase in house prices, averaging £205,895. Meanwhile, Wales saw a 4.6% rise, with homes costing around £226,646. Scotland’s growth was a bit slower at 2.4%, averaging £209,959.

And guess what? London still holds the title for the highest average house price in the UK at £547,614, which is up 3.3% from last year.

Amanda Bryden from Halifax mentioned that the housing market was pretty stable at the start of 2024, with prices really taking off in the summer. She noted that the second half of the year saw prices rise due to falling mortgage rates and some income growth, which eased financial pressures for buyers.

With stamp duty changes coming in April, first-time buyers are feeling more motivated to jump into the market. The threshold for the “nil rate” band will drop from £425,000 to £300,000, which is a big deal for those looking to buy their first home.

In London, though, only 8% of homes will be stamp-duty free for first-time buyers starting in April. In the southeast, that number is 24%, and in the east of England, it’s 32%.

Looking ahead to 2025, Bryden warned that mortgage affordability might still be tough for many. The Bank of England’s base rate is expected to drop slowly, which could keep things challenging.

But she also said that as long as job conditions don’t take a nosedive, buyer demand should hold up pretty well. They’re still expecting modest house price growth this year.

Despite the recent slowdown, Matt Thompson from Chestertons said December 2024 was one of the busiest in years for buyer demand. First-time buyers were eager to get in before the stamp duty changes, and young families were looking to upsize.

Ashley Webb, an economist at Capital Economics, pointed out that the 0.2% drop in the Halifax index doesn’t quite match the 0.7% rise in the Nationwide measure. This suggests that rising mortgage rates might be starting to impact the housing market more than we thought.

Still, he believes mortgage rates will drop more than expected, which is why he thinks house prices will rise by about 3.5% in 2025, compared to the general forecast of 2.5-3.0%.

Interestingly, separate figures from Nationwide showed that house prices actually rose more than expected in December, marking the fastest annual rate since October 2022.