UK house prices have returned to positive territory but tax rises following the Autumn Budget and stamp duty changes from April 2025 could hit market confidence.
After hitting a record high in August 2022, house prices plummeted in the wake of former Prime Minister Liz Truss’s disastrous Mini Budget. Prospective buyers abandoned the housing market as interest rates on mortgages shot up, competition between lenders temporarily collapsed, and the value of cash deposits was eroded by record inflation.
Mortgage rates soared again in mid-2023 and also crept up during the spring of this year as markets questioned the UK’s ability to bring inflation down. There was also uncertainty about when the Bank of England would halt its cycle of base rate hikes – a key factor in setting mortgage rates.
Homebuyer demand has returned after inflation slowed, interest rates are in a downward cycle and the Autumn Budget is out of the way. The Bank of England announced a cut on 1 August 2024 for the first time since March 2020, reducing the base rate from 5.25% to 5% and cut rates further to 4.75% in November.
Some mortgage rates had fallen below 4%, which could boost demand for home loans – potentially pushing up house prices. But tax rises in the aftermath of the Budget may also dent buyer purchasing power and many of the best buy mortgage rates are disappearing amid economic uncertainty.
With a new Labour government in power and promises of housebuilding targets and a Freedom to Buy scheme for first-time buyers, the housing market could be set for another few interesting years.
So, what’s happening to UK house prices now and what are the indicators we use to determine how they are changing?
What’s happening with sold house prices?
Sold house prices are the most accurate indication of what’s happening in the UK property market. We will explore how each house price index (HPI) measures them later in this article.
The major drawback of these house price yardsticks is that the transactions they measure may have been agreed on several months ago. So, the figures may not be a good indication of current market conditions. Given that HPIs which show sold prices often rely on large, varied datasets, they also tend to take about a month to publish.
Average house prices have largely recovered from the start of 2024 when prices dropped amid high inflation and pricey mortgages. The Halifax HPI for November showed average house prices are now at a record high of £298,083 – up 4.8% annually.
Uncertainty in the build-up to the Budget may have slowed things down recently but the latest Nationwide House Price Index also shows house price growth returned to a two-year high in November, rising 3.7% annually.
According to Zoopla’s latest research, rising wages, falling mortgage rates and lower house price growth have made homes more affordable this year.
The property website’s latest House Price Index for November suggests that house price growth is now positive across all regions and countries of the UK.
Average UK house prices are up 1.5% annually to £267,600, its index suggests.
Meanwhile, the latest Land Registry house price data for September- seen as the most accurate figures as it includes both cash and mortgaged purchases – shows shows average UK house price annual inflation was 2.9%, up from the revised estimate of 2.7% in August in the build-up to the Autumn Budget.
However, average values fell by 0.3% on a monthly basis, suggesting there may be some uncertainty in the market.
Are property asking prices going up?
Asking prices are a useful barometer for market sentiment as it currently stands.
These snapshots tend to be published only a few weeks after the data was recorded and so refer to prices as they were then rather than months in the past. Of course, the problem with these is that asking prices don’t necessarily reflect the final sold price.
The latest Rightmove HPI – covering asking prices – showed that while the August interest rate cut had boosted market confidence, asking prices increased by just 0.3% in September, well below the 1.3% average for the month and fell by 1.4% in October. This was blamed on buyers pausing while they waited for the outcome of the Autumn Budget.
Other surveys give us an indication of market sentiment without asking prices. For example, the Royal Institution of Chartered Surveyors (RICS) uses data gathered from its members to track market activity each month. Its most recent set of findings for the month of September found more agents are expecting house prices to rise as buyers and sellers return to the market. But agents are warning that the reduction in stamp duty thresholds in April could weigh on the market.
Will house prices rise in 2024?
After two years of big ups and downs, reading the future direction of house prices has been extremely difficult for analysts. The kremlinology of analysing what the Bank of England will do next, and uncertainty over what will happen to inflation – particularly against a backdrop of global instability – has meant things can change rapidly, soon leaving predictions looking out-of-date.
Despite an unexpected dip in house prices in the spring – a result of the slight increase in mortgage rates – some experts are predicting that the housing market will grow over the course of 2024. This has been helped by falling swap rates as the markets are already pricing in rate cuts. Much of the future direction of house prices depends on what happens to mortgage rates. New uncertainty from the Budget tax rises has pushed mortgage rates up in recent weeks, with few rates left below 4%.
Major estate agency and property services firm Savills is among those looking positively at the remainder of the year. In its latest five-year outlook for house prices, Savills said it expects the average home to see a 2.5% increase in value over the course of 2024.
“Capacity for house price growth will remain limited until there is a more significant reduction in the cost of debt,” says Emily Williams, director of research for Savills. She says the August rate cut is a “clear signal” to the market that the Bank feels it has turned a corner in the battle against inflation, “and it should give most buyers and sellers confidence that the market will improve as we head into 2025.”
Knight Frank has forecast a 3% rise in average house prices this year, after previously predicting a decline.
But it has revised its 2025 forecasts downwards due to the “more adverse rate environment” in the aftermath of the Autumn Budget.
It now expects average UK house price growth of 2.5% in 2025, 3% in 2026, and 3.5% in 2027 down from its August forecast of 3%, 4% and 5%.
Over the five-year period, the agency brand expects cumulative growth of 19.3%, which compares to an equivalent figure of 20.5% three months ago.
Meanwhile, Zoopla expects house prices to have increased by 2% by the end of 2024. Looking to 2025, while it expects the rush to beat the cut in Stamp Duty thresholds in April will drag on growth, the property website expects UK house prices to increase by 2.5% over 2025.
It has predicted house price growth of 7.5% over the next three years.
Rightmove is more bullish about next year and expects asking prices to rise by 4% on average as sellers become more confident and demand hopefully grows further.
All of the house price indices (HPIs) measure the property market in different ways. Here’s an outline of how each of them work.
Nationwide House Price Index
The Nationwide HPI has been in operation since 1952. It is based on the lender’s valuations of properties at the mortgage approval stage – a sales price figure that can change as the transaction moves through the system, but is likely to be close to the final sold price.
The building society’s index is ‘mix-adjusted’. What this term means is that it tracks a representative UK home by applying a relative weight to each type of property characteristic. For example, a three-bed semi-detached.
A statistical process called ‘hedonic regression’ is then applied to “relate observed combinations of these characteristics to the house purchase price”, Nationwide says. This stops the HPI from displaying any price disparities caused by different types of property being sold each month. Nationwide’s HPI is published at the start of every month.
Halifax HPI
Halifax’s HPI uses a dataset that goes back to 1983. Similarly to the Nationwide index, it’s based on the bank’s valuation of a home at the mortgage approval stage. A standardised house price is calculated using this data.
Property price movements are then analysed over time on a like-for-like basis. Its HPI is usually published in the first week of every calendar month.
Zoopla HPI
Zoopla claims its HPI is the most comprehensive index available. It uses sold house prices, mortgage valuations, and data from agreed sales to provide a holistic picture of the market. This price data normally has a longer time lag than other HPIs.
The property listing website also gathers information on the number of days it takes to sell a home – from the initial listing to when the property goes under offer. It also provides stats on the number of listings and buyers. This dataset is slightly more up-to-date, coming out only about 10 days after the four-week data period has ended.
ONS/Land Registry HPI
Arguably the most comprehensive HPI is produced by the UK’s official statisticians at the Office for National Statistics (ONS). Using data from HM Land Registry – the public body that records all property sale completions in England and Wales – plus equivalent data from Scotland and Northern Ireland, the ONS is able to provide the exact price properties sold for in a given month.
While this means it provides a broader view of the UK housing market, the ONS HPI has a time lag of at least two months due to how long it takes to process submissions from conveyancers to the Land Registry after the completion stage. The sheer size of the dataset means it also goes through at least one revision after it’s published, for example, to take account of seasonal effects and as more data becomes available. It means average house prices and property inflation can rise or fall after the initial estimates are provided.
The most recent month for which we have ONS data was August 2024, when house prices rose 2.8% annually. You can see how prices are changing in your area by using the ONS house prices tool.
Rightmove HPI
Rightmove’s HPI differs from the other indices in that it is based solely on asking prices. It uses 95% of the properties it lists for sale on its website (excluding those in inner London) to measure seller sentiment at the very first stage of the sales process.
These statistics are then released about 10 days after the end of the four-week data period they have come from. It means the figures show seller trends almost as they happen. Handily, Rightmove also measures discounting and the speed at which properties sell.
But given the HPI only includes asking prices, it is highly exposed to the week-by-week volatility of the property market. There is also the fact that not all listed homes sell, with some being withdrawn and relisted at a later date. So, the HPI cannot be seen as a reliable indicator of overall market conditions.
UK Residential Market Survey by RICS
The UK Residential Market Survey by the Royal Institution of Chartered Surveyors (RICS) is very different to all of the HPIs on this list. Rather than measuring house prices, it’s a monthly poll of chartered surveyors operating in the residential sales and lettings markets. As such, it is an indicator of property market sentiment.
RICS measures the percentage of surveyors reporting house price increases versus declines, and how many of them report more buyer instructions (a sign that a transaction is taking place) versus fewer. It therefore serves as an indicator of current and future market conditions in the UK.
The surveyors who take part are asked 18 questions on various metrics, such as sales, enquiries and listings, and are required to report whether these have increased, remained the same or decreased. A positive net balance indicates that there is more activity taking place, while a negative net balance suggests that the housing market is weakening.