December Housing Market Update: 2024 Trends and What to Expect in the New Year

As we close out 2024, the UK housing market remains a complex and evolving landscape. From shifting interest rates to challenges faced by private developers and housing associations, there’s plenty to unpack. 

Here’s your monthly update, featuring the latest market trends, policy changes, and predictions for 2025.

Housing Market Highlights: December 2024

Private Developers Adapt to Rising Costs

Private developers are grappling with rising material costs and labour shortages, which have impacted project timelines and profit margins. Many are scaling back on large developments, particularly in areas where demand has softened due to affordability issues. However, some are pivoting towards mixed-use developments and build-to-rent schemes, which remain resilient.

Housing Associations: Balancing Act Continues

Housing associations face their own set of challenges. Increased regulatory pressures and cuts to funding have forced many to rethink their strategies. A focus on sustainability is taking centre stage, with new developments increasingly incorporating green technologies. However, delivering affordable housing at scale remains a pressing issue, particularly in high-demand areas like London and the South East.

Mortgage Market: Interest Rates and Affordability

The Bank of England has maintained its base rate at 5.5%, but speculation about further hikes in early 2025 is causing uncertainty. This has led to a cooling-off in mortgage approvals, with first-time buyers hit hardest. The average two-year fixed mortgage rate currently sits around 6.1%, while five-year fixes average 5.5%, making affordability a key concern.

Lenders are responding by offering longer-term fixed-rate deals and more flexible terms, but buyers remain cautious as house prices show little sign of significant drops.

Housing Market News

House Prices: Stability Amidst Uncertainty

House prices have remained relatively stable overall, with regional variations. According to the latest figures:

• London and the South East continue to see price stagnation.

• Northern regions and parts of Wales have shown modest growth, supported by lower entry-level prices.

• Scotland is experiencing a slowdown due to stricter rental regulations and lower investor activity.

Renting Crisis Deepens

The private rental sector is under pressure, with average rents increasing by over 12% in some areas this year. Landlords are feeling the squeeze from increased regulations, which has led to some exiting the market, further tightening supply. Meanwhile, tenants face longer waiting times and higher rents, exacerbating the cost-of-living crisis.

Looking Ahead: What Will 2025 Bring?

1. Interest Rates and Mortgage Market Trends

Many experts predict the Bank of England will begin reducing rates in the second half of 2025, potentially easing mortgage affordability pressures. However, buyers should remain cautious, as rates may stay elevated for longer than expected.

2. Increased Focus on Sustainability

With the UK government pushing for net-zero goals, expect more emphasis on energy-efficient homes. Retrofits for older properties will gain momentum, with government grants and incentives playing a key role.

3. Build-to-Rent Expansion

The build-to-rent sector is expected to grow significantly in 2025, providing more options for renters in urban areas. Developers are likely to prioritise community-focused amenities and eco-friendly designs to attract tenants.

4. Affordable Housing Initiatives

Housing associations and councils will continue to push for more affordable housing projects, though funding will remain a critical bottleneck. The government’s housing policies in the upcoming spring budget could be pivotal in shaping the sector’s direction.

Final Thoughts

2024 has been a year of resilience and adaptation for the UK housing market. While challenges persist, there are glimmers of optimism as we look to 2025. Whether you’re a buyer, renter, landlord, or industry professional, staying informed and flexible will be key in navigating the months ahead.

Thank you for joining us on this journey throughout 2024. Here’s to a prosperous and stable 2025!

Stay tuned for more updates, insights, and advice in the new year.

Wishing you a warm and happy holiday season,

Move or Improve