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Here’s some instant reaction to the Halifax house price data.
Tom Bill, head of UK residential research at Knight Frank, said:
The current rate of house price growth will come under more pressure as higher borrowing costs triggered by the budget start to bite. A number of buyers are still sitting on sub-4% mortgage offers made before October, which has supported demand in recent months.
Activity has also been temporarily boosted ahead of April’s stamp duty increase but a recent dip in mortgage approvals is a sign that cracks from the Budget are starting to show. We recently revised down our UK house price forecast for 2025 to 2.5% to reflect the tougher lending landscape and the fact economic growth is struggling to gain momentum.
Anthony Codling, housing analyst at RBC Capital Markets, noted that house prices rose by nearly £10,000 year, but fell slightly in December.
The fall in December ended a run of five consecutive monthly increases, but with wages expected to rise and mortgage rates to reduce in 2025 we expect house prices to rise in 2025.
The Stamp Duty stampede is likely to underpin prices in the first three months of the year, before the house price baton will be passed onto mortgage rates. There remains uncertainty around the broader macroeconomic outlook, but demand for homes continues to outstrip supply and our love affair with homeownership has not been dented by rising costs of living, higher for longer mortgage rates or the budget.
Amanda Bryden, head of mortgages at Halifax, said:
The housing market was broadly steady at the start of 2024, with house price growth taking off from the summer onwards. In the latter half of the year, house prices grew in response to the falls in mortgage rates, alongside income growth, both leading to financial pressures somewhat easing for buyers. Impending changes to Stamp Duty thresholds have also given prospective first-time buyers even greater motivation to get on the housing ladder and bring any home-buying plans forward. Together, these elements meant mortgage demand picked up, hitting the highest level in over two years and back to levels seen pre-pandemic.
In many areas across the country, house prices were also buoyed by demand outstripping supply, possibly further amplified by homeowners holding off putting their property on the market – perhaps in anticipation of mortgage rates reducing further.
Where does that leave the housing market for 2025? While the housing market has been supported in recent months by falling mortgage rates, income growth and the announcement on upcoming Stamp Duty policy changes, mortgage affordability will remain a challenge for many, especially as the Bank Rate is likely to come down more slowly than previously predicted. However, providing employment conditions don’t deteriorate markedly from a more recent softening, buyer demand should hold up relatively well and, taking all this into account, we’re continuing to anticipate modest house price growth this year.
Introduction: UK house prices dip for first time since March; Next warns of slowing sales growth in 2025
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
UK house prices finished 2024 up 3.3% over the year, with the average property value falling slightly in December, according to a major mortgage lender.
The average house cost £297,166, down by 0.2% in December from November, following five consecutive monthly increases, according to Halifax. The annual rate slowed from 4.7% in November.
Northern Ireland showed the strongest annual house price growth in the UK, up 7.4%, to an average of £205,895.
House prices in Wales were up 4.6% year on year, with properties costing £226,646, on average. In Scotland, the annual rate was lower than in the rest of the UK, 2.4% to an average £209,959.
London retains the highest average house price across the country, at £547,614, up 3.3% year on year.
Despite the slowdown, Matt Thompson, head of sales at the estate agent Chestertons, said:
December 2024 was one of the busiest Decembers in years in terms of buyer demand. This was driven by first-time buyers who were keen to get on the property ladder before this year’s changes to Stamp Duty but also by second-steppers, including young families, wanting to upsize.
Next has upped its annual profit forecast by £5m after stronger than expected sales online, particularly overseas. However, it also warned that sales growth will slow this year, and said it will need to raise prices due to the impact of recent budget measures.
The UK fashion and homewares retailer faces a £67m increase in its wage costs in the year to January 2026, and said it will need to push through an “unwelcome” 1% rise in prices as well as operational efficiencies and other cost savings to offset the hit. This will affect sales, it said.
We believe that UK growth is likely to slow, as employer tax increases, and their potential impact on prices and employment, begin to filter through into the economy.
Next reported a 5.7% rise in sales for the nine weeks to 28 December, excluding the impact of a change in timing of its annual discount event, our retail correspondent Sarah Butler reports. It now expects profits for the year to the end of January to rise by 10% to just over £1bn for the first time.
Sales online, including Next branded items and its Label selection of other well-know brands, rose by 6.1% and overseas online sales were up by more than 30% but sales in stores fell by 2.1%.
Next is expected to be among the festive winners as fashion retailers had been expected to have endured a tough end to the year as a mild autumn led to widespread discounting across the high street. The retailer is known for holding out on discounting until late in the season and so may have benefited more from the late arrival of colder weather as well as its strong online service.
We are expecting a flurry of economic data today.
The Agenda
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8.30am GMT: Eurozone, France, Germany, Italy HCOB Construction PMI for December
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9am GMT: Italy Unemployment rate for November (previous: 5.8%)
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10am GMT: Eurozone inflation for December flash (previous: 2.2%, forecast: 2.4%)
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10am GMT: Eurozone unemployment rate for November (previous: 6.3%)
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1.30pm GMT: US Trade for November
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3pm GMT: US ISM Services PMI for December
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3pm GMT: US JOLTs Job Openings for November
