UK Housing Market Update: February 2025
According to Halifax’s latest house price index, UK property prices reached a new record of £299,138 in January, showing a 0.7% monthly increase and 3% annual growth. This growth has been particularly strong in northern markets.
The Bank of England’s recent decision to reduce its base rate to 4.5% is expected to stimulate buyer demand through lower mortgage rates. This 25-basis-point cut represents an 18-month low and improves affordability for potential buyers.
Market conditions are expected to remain favorable as household earnings continue to outpace inflation. First-time buyers are particularly active, aiming to complete purchases before new stamp duty thresholds take effect on April 1st.
Market Outlook
Amanda Bryden, Halifax’s Head of Mortgages, predicts mortgage rates will remain between 4-5% throughout 2025. She notes that while buyers have adjusted to rates above the historical 1% lows, the persistent supply shortage remains a fundamental market challenge. This imbalance, combined with improving affordability, suggests continued modest price growth.
Investment Landscape
The UK property market continues to attract investors, especially from overseas, due to:
- Ongoing supply-demand imbalance driving price growth
- Strong rental sector performance
- Recent policy developments regarding non-dom taxation
The government’s decision to extend the non-dom tax transition period from two to three years has positively influenced market sentiment. David Johnson of INHOUS notes that January’s market was particularly driven by first-time buyers and high-net-worth individuals responding to these policy adjustments.
Rental Market
The rental sector remains robust, characterized by:
- Limited supply versus high tenant demand
- Strong rental yields in targeted areas
- Continued capital growth opportunities
Despite competitive market conditions, Johnson advises that buyers should still engage in price negotiations rather than accepting asking prices at face value.
