In a market where there is a huge amount of chatter – quite rightly – about Bank Base Rate, swaps, mortgage product rates, and their impact on affordability, or indeed where they might be heading next, it feels like the once great British national obsession of house prices has been placed somewhat on the back burner recently.
It used to feel like you weren’t too far from a headline which read ‘House prices soar’ or ‘House prices crash’ but just lately it’s more likely to have been, ‘House prices move up slightly’, which is quite possibly the worst headline ever written, but there you go.
My own feeling is that 2025 will be a year when house prices figure much more prominently in the overall mortgage or property market debate, not least because I sense we are going to see some potentially significant shifts.
Just last month, the Rightmove Asking Price Index was released revealing an almost £6,000 increase in the average asking price over the last month alone.
According to the Index, that places the average asking price for a typical property at £366,189, significantly up on the average house prices of both the Halifax and the Nationwide indices, which are both currently below £300,000.
Now, of course, we have to be aware that these are asking prices and not the paid-for price but its perhaps informative to look at what is happening to house prices, and importantly, what is predicted to happen to house prices in the next year or two.
I say this because, after a period when house prices did stabilise with very little movement, it now looks as if they are back on an upward trajectory. Indeed, in some areas of the country, prices have never stopped rising and individual buyers of course have needed to take that into account.
For first-time buyers in particular, the suggestion that house prices are now more likely to move upwards is clearly going to be one which they will take great note of.
Perhaps this is why we’ve seen a concerted spike in first-time buyer activity over the past few months?
The most recent house price Index from Halifax talks about anticipating “modest house price growth this year” and the annual percentage change over the last half year appears to have gone up a notch, moving from around 1% to over 4% in some months.
Similarly, for the Nationwide, we finish the year with annual house prices up 4.7%, and while the building society is suggesting that house price rises, post-Stamp Duty change in April, will return to the 2% to 4% range, we may well see a further strengthening of that.
I say this for a number of reasons, not least our country’s continuing inability to build the required number of new homes needed to meet demand, and importantly, to meet the huge increase in population we’ve seen over the last 10 years-plus.
Yes, we will all know this Government’s target for new homes during this Parliament is around 1.5 million-plus, but to get up to this number per year is – let’s face it – going to need a phenomenal shift in so many areas.
One that I certainly don’t think will be met over the next two years, and is unlikely to be met over the three that follow.
Certainly, and this has been a shift from the Government in recent months, the ability to hit that housing target is going to be back-loaded.
By this, I mean the majority of homes are going to be coming to market in the last few years of this Parliament not the first two.
That inability to hit the supply required to meet the demand already in this market is going to result in one thing – an increase in house prices.
In certain areas of the country we know that prices are running well in advance of 4%.
According to the Nationwide, Northern Ireland was up at a 7.1% annual increase, while the North and North West was not far off 6%.
My view is that we’ll start to see other regions of the country, particularly in the South and South East starting to inch up over the course of the next 12 to 24 months.
Just this month alone, I have worked with a number of first-time buyers in London who have been putting in offers over the asking price.
This isn’t because they are trying to beat the Stamp Duty deadline – for these potential buyers the difference in taxation is minimal given the prices of the houses they are buying – but because they really want to get on the ladder right now, and they are fed up of sitting on their hands as they have felt forced to do over the last year or so.
My feeling is that they are also being driven by an understanding that, despite what many are saying, buyers in many regions of the country need to act quickly, because there is not a surfeit of supply, and as a result, prices are only likely to continue moving upwards.
We are, of course, not talking about double-digit increases in prices as we have seen in some periods this century, but could we see concerted 5%, 6% or 7% uplifts, especially if that new-build target moves further and further away each and every year?
As the year progresses, I suspect some would-be buyers are going to increasingly feel the best time to have bought a property was yesterday, and this is going to act as both a motivator and catalyst for greater numbers of transactions.
This is clearly a positive for the advisory sector, and one that we should seek to take advantage of, particularly when it comes to a first-time buyer market who will naturally be wanting plenty of advice on how they turn a property dream into a reality.
Sebastian Murphy is group director at JLM Mortgage Services
