UK house prices experienced a notable year-on-year rise of 4.7% in December 2024, according to data from the Nationwide House Price Index. Notably, Northern Ireland emerged as the frontrunner in growth, boasting an impressive 7.1% annual increase. By contrast, East Anglia lagged behind, registering only a slight uptick of 0.5% over the same period—a stark disparity that highlights regional market dynamics.

The average UK house price climbed to £269,426 in December, a marginal increase from November's £268,144. However, the pace of monthly growth decelerated, with December recording a 0.7% rise compared to the more robust 1.2% growth seen the previous month.

Robert Gardner, Nationwide’s chief economist, offered insights into the market's performance: “UK house prices ended 2024 on a strong footing, up 4.7% compared with December 2023, though prices were still just below the all-time high recorded in summer 2022. House prices increased by 0.7% month on month, after taking account of seasonal effects, following a 1.2% rise in November.”

Elaborating on the resilience of the housing market amid persistent challenges, Gardner noted: “Mortgage market activity and house prices proved surprisingly resilient in 2024 given the ongoing affordability challenges facing potential buyers. At the start of the year, house prices remained high relative to average earnings, which meant that the deposit hurdle remained high for prospective first-time buyers. This is a challenge that had been made worse by record rates of rental growth in recent years, which has hampered the ability of many in the private rented sector to save.”

He continued, emphasizing the pressures of elevated borrowing costs: “Moreover, for many of those with sufficient savings for a deposit, meeting monthly payments was a stretch because borrowing costs remained well above those prevailing in the aftermath of the pandemic. For example, a typical mortgage rate for someone with a 25 per cent deposit hovered around 4.5% for much of the year, three times the 1.5% prevailing in late 2021, before the Bank of England started to raise the Bank Rate.”

Despite these headwinds, Gardner found a silver lining in market activity trends: “As a result, it was encouraging that activity levels in the housing market increased over the course of 2024 with the number of mortgages approved for house purchase each month rising above pre-pandemic levels towards the end of the year.”

Looking forward, Gardner offered a nuanced outlook for 2025, cautioning about potential market fluctuations: “Upcoming changes to stamp duty are likely to generate volatility, as buyers bring forward their purchases to avoid the additional tax. This will lead to a jump in transactions in the first three months of 2025 (especially in March) and a corresponding period of weakness in the following three to six months, as occurred in the wake of previous stamp duty changes. This will make it more difficult to discern the underlying strength of the market.”

Yet, his forecast was not without optimism: “But, providing the economy continues to recover steadily, as we expect, the underlying pace of housing market activity is likely to continue to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth. The latter is likely to return to the 2-4% range in 2025 once stamp duty related volatility subsides.”

The interplay of economic recovery, policy shifts, and evolving market dynamics sets the stage for an intriguing 2025 in the UK housing market.