UK house prices continue to climb along with appetite from buyers to complete purchases, with property investors still driven to the market thanks to its strong long-term outlook.
The latest house price index from Halifax has revealed another uptick in property prices in the UK, bringing them to a record high of £299,138 with a 0.7% month-on-month increase in January. Annually, this marks a 3% rise in overall values, driven largely by the stronger northern property markets.
Yesterday’s announcement from the Bank of England cutting its base rate by 25 basis points to 4.5% – an 18-month low – is expected to further spur on appetite from buyers, boosting affordability thanks to linked falls in mortgage rates. For property investors, the positive house price growth alongside improving borrowing costs are also keeping appetite high to push ahead with deals.
Thanks to ongoing growth in household earnings, which is largely expected to continue to outpace the rate of inflation over the coming year, financial pressure overall is forecast to ease, bringing more interested buyers to the market. This includes first-time buyers, who will be especially keen to complete their purchases before new stamp duty thresholds come into play from 1st April.
While 2025 has got off to a positive start so far in terms of transaction numbers and price rises, forecasts point to this continuing over the course of the year. Amanda Bryden, Head of Mortgages, Halifax, said: “As things stand, mortgage rates are likely to hover between 4% and 5% in 2025, influenced by both global financial markets and domestic monetary policy.
“Over the past year, buyers have been getting used to this new normal, understanding that rates are unlikely to return to the historical lows of 1%.
“But the fundamental issue in the housing market remains the lack of supply. This long-term trend, coupled with a gradual improvement in affordability, should support further modest house price growth this year.”
Property investors eyeing value growth
Property investors and high-net-worth individuals, particularly those based overseas, continue to be drawn to the UK housing sector thanks to the ongoing supply-demand imbalance across much of the country, which is expected to continue to push prices upwards.
Many of these buyers have also “reevaluated the UK property market” following Chancellor Rachel Reeve’s intentions to pull back on some of the previously announced non-dom tax changes, according to comments from David Johnson, managing director of property consultancy INHOUS.
Last year ahead of the election, Labour had announced plans to toughen its stance on non-dom tax status, which allows a UK resident whose permanent domicile for tax purposes is overseas, meaning they only pay UK tax on money earned in the UK. However, the government now plans to extend the transition period from two years to three.
David Johnson said: “January’s property market was driven by two buyer demographics in particular. First-time buyers rushing to beat the looming changes to Stamp Duty thresholds and, on the other spectrum of the market, high-net-worth-individuals and property investors who revaluated the UK property market following Rachel Reeve’s plans to soften her previously announced non-dom tax changes.
“The heightened demand has contributed to more competitive market conditions for house hunters and the majority of properties holding their value, however, buyers should not shy away from entering price negotiations.”
Property investors also continue to be motivated by the UK’s strong rental sector credentials. Like the sales market, rental homes remain in short supply compared with the number of tenants seeking homes, leading to capital growth and strong rental yields for property investors who target the right areas.
North of England still outpacing south
Prices continue to accelerate the most in the north of England, and rental price growth matches this trend, rising the most in the least expensive areas. Property investors targeting these locations are likely to see better capital appreciation, alongside a positive constant flow of tenants.
Many tenants are also staying put for longer in their rental properties due to this heightened competition, meaning fewer and shorter void periods for property investors who purchase property in areas with large tenant populations.
Geographically, Halifax shows that the north-south divide remains firmly in place. In fact, despite the latest upwards house price movement overall, two thirds of the UK’s nations and regions recorded a price inflation slowdown in January – demonstrating that the growth in the areas that experienced it was well above average.
In England, both the North East and the North West continue to top the chart when it comes to house price growth, and these remain key targets for property investors seeking strong returns. House prices in the North East were up 5.2% compared with a year earlier, while the North West recorded the second strongest regional growth.
However, prices in these areas remain below average, making them a more accessible option for property investors looking to maximise their budgets.
Prime markets struggling
Jonathan Hopper, CEO of Garrington Property Finders, said: “The north-south divide is getting bigger as northern regions, where value is perceived as better, post some increasingly punchy numbers. Prices in the North East grew 5.2% in the past year, nearly twice as fast as prices rose in London.
“Even more striking is the price divide. If the mainstream market is going like a train, the prime market is going like a glacier.
“Price growth has slowed to a crawl, or is flat, in some of Britain’s most expensive and desirable locations. Two factors lie behind this – an abundance of homes for sale, and the intensely price-sensitive approach being taken by buyers.
“While at the bottom end of the market, some first-time buyers have been viewing in haste and offering high in order to do a deal quickly in an effort to beat next month’s Stamp Duty deadline, at the top end of the market it’s the opposite.
“With the supply of prime homes for sale outstripping demand, wealthy buyers find themselves spoilt for choice and able to negotiate hard on price.
“Yesterday’s reduction in the Bank of England Base Rate will reduce the cost of borrowing and give buyers the freedom to stretch their budget if they want, but at present price inflation is centred on northern England and Wales.
“Elsewhere, the price rises are much more modest and sellers need to price their homes carefully or risk seeing them stuck unsold on the shelf.”
