The UK housing market has shown strong signs of recovery, with house prices rising at their fastest pace in nearly two years. According to official data released by the Office for National Statistics (ONS) on February 19, 2025, the annual increase in house prices reached 4.6% in December 2024. This rise comes amid a reduction in borrowing costs and a rush to complete property purchases before tax changes take effect in April.
House Prices Surge by 4.6% in December 2024
The latest ONS data reveals that the average house price in the UK increased by 4.6% in the 12 months to December 2024, reaching £268,000 ($337,760). This marks the highest annual growth rate since January 2023. The growth also shows an improvement from the 3.9% increase in November 2024.
Several factors have contributed to this rise, including:
- Lower borrowing costs, making mortgages more affordable.
- Increased buyer demand ahead of planned tax changes in April 2025.
- Positive market sentiment, boosting confidence among homebuyers.
Regional House Price Trends
Despite the overall increase in house prices across the UK, London remained stagnant, showing no growth compared to other regions. Instead, the strongest price increase was recorded in northeast England, where house prices rose by 6.7%.
This suggests that affordability and demand vary across the country, with some regions benefiting more from current market conditions than others.
London’s Rental Market Sees Sharp Increases
While house prices in London showed little movement, rental prices continued to surge. Monthly rents for private properties in London increased by 11.0% in the year to January 2025, reaching an average of £2,227 per month. However, this increase was slightly lower than December 2024’s 11.5% rise.
On a national level, private-sector rents across Britain were 8.7% higher in January 2025 than the same period last year, bringing the average rent to £1,332 per month. The rent growth rate slowed compared to December’s 9.0% increase, indicating a potential stabilization in rental prices.
Factors Driving House Price and Rent Changes
Several key factors are influencing the housing and rental markets in the UK:
1. Lower Interest Rates
Falling borrowing costs have made mortgages more accessible, encouraging more buyers to enter the market. This trend is expected to continue in 2025.
2. Tax Changes in April 2025
Many buyers are rushing to finalize property purchases before new tax rules take effect in April, pushing demand higher in the short term.
3. Regional Differences in Demand
While London’s house prices have remained flat, other regions, especially northeast England, have seen higher growth, likely due to better affordability and local economic factors.
4. Rising Rental Demand
The significant rent increases in London suggest strong rental demand, possibly driven by a growing population, limited housing supply, and affordability challenges preventing people from buying homes.
The UK housing market has gained momentum, with house prices rising at their fastest rate since early 2023. While some regions, such as northeast England, have seen significant price increases, London’s property prices have remained unchanged. However, rental prices in London continue to rise sharply, reflecting high demand in the capital’s rental market.
With borrowing costs expected to remain low and tax changes approaching, the property market could see continued fluctuations in the coming months. Buyers and renters alike should stay informed about these trends to make well-informed decisions in 2025.