House Price Inflation Steadies Following Stamp Duty Change – Nationwide
05-06-2025
Jo Thornhill, Laura Howard
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30 April: Values Rise 3.4% Annually But See Monthly Fall
House prices rise 3.4% year on year
Price growth fell by 0.6% in April
Average home worth £270,752
House prices fell by 0.6% in April, taking the annual house price inflation figure to 3.4% (down from 3.9% in March), according to the latest figures from Nationwide building society’s house price index, writes Jo Thornhill.
Robert Gardner, Nationwide’s chief economist, said the softening in price increases was widely expected given the changes to stamp duty that came into force on 1 April. The reduction to the nil rate band of stamp duty for homebuyers means many, including first-time buyers, will pay more in tax when they buy a property.
Gardner said: “Early indications suggest there was a significant jump in transactions in March, with buyers bringing forward their purchases to avoid additional tax obligations.
“The market is likely to remain a little soft in the coming months, following the pattern typically observed following the end of stamp duty holidays. Nevertheless, activity is likely to pick up steadily as summer progresses, despite wider economic uncertainties in the global economy, since underlying conditions for potential home buyers in the UK remain supportive.
“Unemployment remains low, earnings are rising at a healthy pace in real terms (after accounting for inflation), household balance sheets are strong and borrowing costs are likely to moderate a little if Bank Rate is lowered further in the coming quarters as we and most other analysts expect. Indeed, swap rates, which underpin fixed rate mortgage pricing, have moderated in recent weeks.”
Residential property sales increased by 62%, up to 177,370 in March from 109,700 in February, according to HMRC transaction data published today (30 April). The rise, the third highest month-on-month increase since records began, was linked to the changes to the nil rate bands for stamp duty.
Jason Tebb, president at property website OnTheMarket, said: “Affordability remains an ongoing concern with rates still higher than many borrowers have grown used to, combined with the high cost of living and other pressures.
“Lenders have been trimming mortgage rates in recent days and further action from the Bank of England [the next interest rate decision is on 8 May] should enable this trend to continue, giving buyers who rely on mortgages increased confidence to make their move.
“With more property stock on the market as one would expect at this time of year, average house prices are being held in check, although local markets and even individual properties can vary considerably.
“Buyers on the whole remain sensitive on price and keen to negotiate because of affordability pressures, so sellers should seek advice from local agents and price accordingly.”
What will happen to mortgage rates and house prices in 2025?
House prices cool as demand slows, says Zoopla
According to property portal Zoopla, average house prices rose 1.6% in the year to March. This compares to the 0.2% annual inflation recorded in March 2024 but is down from 1.9% in December 2024.
Zoopla says buyer demand is up 1% year on year, tempered in the first few months of 2025 by the changes to stamp duty.
The stock of homes for sale is 12% higher than a year ago as more sellers enter the market, possibly buoyed by falling mortgage rates, while the number of sales agreed is 6% higher than at the same point in 2024.
Zoopla’s property experts believe the loosening of mortgage lenders’ stress tests for affordability, prompted by calls from the regulator the FCA to relax stress tests, could boost buying power by up to 20%, which would further support sales.
Richard Donnell at Zoopla said: “Buyer demand has cooled in recent weeks as the supply of homes for sale continues to expand, slowing house price inflation. We expect continued growth in sales agreed, and slow but steady house price inflation.”
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Average Home Now Worth £268,000
The average property price was unchanged in February, according to the latest data released by the Office for National Statistics, but year-on-year values are up by 5.4%, writes Jo Thornhill.
The ONS data is based on completed transactions rather than, for example, asking prices, and is thus one of the most accurate reflections of house prices. The index shows that the average home in the UK is now worth £268,000 (February 2025), £13,000 higher than a year ago.
Transaction figures were also up in February. The number of sales was 28% higher than in February 2024, and 13% higher than in January 2025. This likely reflects buyers’ desire to complete their purchase in the run-up to changes to the stamp duty regime that would have seen them paying more tax from 1 April.
The ONS house price data comes as inflation figures out today show the rate of price increases across the economy fell slightly in the year to March to 2.6% from 2.8% in February.
The drop could encourage the Bank of England to reduce interest rates at the next meeting of its Monetary Policy Committee on 8 May, which would be a further boost to the property market in the wake of the Stamp Duty changes.
According to the ONS, average prices rose in the 12 months to February across the UK. They increased by 5.3% in England to reach an average of £291,640, by 4.1% annually in Wales to reach £207,382, and by 5.7% in Scotland, where average prices are now at £185,870.
In Northern Ireland, the average home increased in value by 9% in the year to the end of the fourth quarter of 2024, the latest data available. A typical property here is now worth £183,259.
Within English regions, the north-south divide remains, with the North West seeing annual price growth of 8% (the average property is now £211,977), for example, while in London prices have gone up by just 1.7% in the same time (average homes in the capital are now worth £555,625).
Semi-detached and terraced homes have seen the largest annual increase in average prices at 6.1% and 6.2% respectively. A typical terraced home is now worth £225,486, while a semi-detached home is worth £270,925, on average.
Flats have risen by the smallest amount year on year at 3%, taking the value of a typical flat to £196,110.
Mark Harris, chief executive at mortgage broker SPF Private Clients, said: “The dip in inflation to 2.6% is encouraging news as far as future interest rate movements are concerned, and if this downward trend continues, it will make it easier for the Bank of England to cut rates again sooner rather than later.
“Another rate reduction would help boost affordability and would be particularly timely now that the stamp duty concession has ended.
“On the mortgage front, several lenders have cut fixed rates, although the best deals aren’t hanging around for long.”
Karen Noye, mortgage expert at advisor Quilter, said: “February’s house price figures show the market holding steady on a monthly basis, but still growing firmly on the year. This suggests a housing market that continues to defy expectations.
“But while house prices have picked up in recent months, the outlook remains mixed. Regional differences are stark and affordability pressures haven’t gone away. But if mortgage rates continue to ease and confidence builds, this spring could mark a turning point for both buyers and sellers.”
Source: ONS (April 2025)
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Buyer Demand Up 5% In Resilient Market
The average asking price of homes coming to market reached a record high of £377,182 in April, according to data from property portal Rightmove, writes Jo Thornhill.
This suggests increased demand across the market despite the stamp duty changes that came into force on 1 April, bumping up property tax bills for many buyers.
The latest monthly increase to average prices was recorded at 1.4% while annual house price inflation is running at 1.3%.
The monthly rise in average prices is bigger than the increases typically seen at this time of year, according to Rightmove, even with a decade-high number of homes for sale. Higher values have been fuelled by an increase in buyer demand, up 5% compared to April 2024. The number of sellers coming to market is up 4% annually.
The increase in choice of homes for sale and increased buyer demand points to resilience in the housing market, according to Colleen Babcock, property expert at Rightmove: “Confidence from new sellers is a good sign for the overall health of the market, but they do need to be careful when setting their asking price.
“The high level of supply right now means buyers are likely to have plenty of homes in their area to choose from, and an overpriced home will stick out for the wrong reasons.
“It’s important to remember that among records and national trends, the [country’s] housing market is made up of thousands of diverse local markets, each uniquely responding to market changes and world events. London, for example, is likely to see greater knock-on effects from the United States trade tariffs than the rest of the country, while Northern regions appear to be performing more strongly post-stamp duty rise.
“It’s difficult to predict what the next few months will bring, but if mortgage rates reduce more quickly, it would be a helpful boost to buyer affordability.”
There is a growing belief that the Bank of England will cut its benchmark Bank Rate from its current 4.5% to 4.25% on 8 May, its next scheduled decision, with up to three further cuts expected during the year. This would trigger reduced mortgage rates and stimulate demand.
Interest rates are likely to fall if the Bank feels the economy is facing recessionary threats as a result of an international trade war triggered by the imposition of import tariffs by the US and retaliatory action, primarily by China.
Rightmove says that, regionally, Scotland and northern regions of England have seen the biggest annual increase in asking prices. The average price in Scotland rose 2.6% year on year to £200,593, while in the North West of England prices are up 2.6% to an average of £266,408. In the North East prices are up 2.2% annually to an average of £194,213.
Annual growth has been slowest in London and the South West of England at 0.4% and 0.2% respectively in the year to April. The average asking price of a home in the South West now stands at £394,342, while London has the highest asking price of any region at £699,200.
Nathan Emerson at estate agent trade body Propertymark said: “It is encouraging to witness the market continue to deliver growth, despite the increasingly complex economic challenges we face. Although the rush from many people in England and Northern Ireland to beat Stamp Duty threshold changes has concluded, we now progress into the spring and summer months, which typically deliver strong momentum.
“We remain in a position where inflation is on a potential uneven footing, and this may impact any decision the Bank of England might make regarding interest rates when they next meet on 8 May.”
www.forbes.com