UK house price inflation stood at 1.9% at the end of January from a year ago in response to higher mortgage rates and rising buying costs from April, Zoopla reveals.
Zoopla’s latest data finds the number of sales agreed are 10% higher, and 11% more homes are for sale than a year ago, meaning there are more buyers in the market.
House price inflation continues to follow a north-south divide. Average prices are 7.2% higher in Northern Ireland and 3% higher in the North West.
Comparatively, house prices across London and southern England are only 1% to 1.2% higher over the last year.
House price inflation stalled or slowed across most regions and countries of the UK in January.
This reflects the sharp dip in consumer confidence in the wake of the Autumn 2024 Budget, and mortgage rates increasing by 0.5% since September 2024.
Zoopla found that one trend emerging during the early weeks of 2025 is a double-digit increase of 14% in the number of flats on the market, with a more modest increase of 5% in the number of houses for sale.
The average price of a flat has increased by just 7% over the last five years, compared to house prices increasing by 24%.
The gap between the price of houses and flats is at a 30-year high as the average price of a house (£319,500) is 67% higher than the average price of a flat (£191,300).
While flats are looking like better value for money, buyers are still prioritising houses. Zoopla data shows that in 2017, over two in five (44%) of first-time buyers looking to buy outside London wanted a three-bed house.
Among major UK cities, monthly mortgage repayments on a flat are 43% lower than the cost of renting, while mortgage costs for a house are 22% higher.
Zoopla says the housing market remains resilient with more people looking to move home in 2025 and 2026 than this time last year.
Average earnings growth of 6% over the last year, well ahead of inflation, is supporting buyer confidence and helping to reset affordability.
In the report, Zoopla says: “There has been a sizable increase in the number of homes for sale in the early weeks of the year, which is giving buyers greater choice and stronger negotiating power.”
“Alongside higher stamp duty costs coming in for many from April, we expect house price inflation to be kept in check at 2-2.5%, with above-average growth in more affordable markets outside southern England.”
The Mortgage Lender distribution director Sara Palmer comments: “The property market has gone from strength to strength, with sales and buyer demand continuing to trend upwards this month.”
“This is in part due to the recent base rate reduction, which has fuelled expectations that there will be further cuts in 2025. Already we’re seeing a few high street lenders offering rates below 4%, which is indicative of the confidence in the property market.”
“On top of this, the stamp duty deadline is fast approaching which is prompting first-time buyers to tie up their property plans before March, thereby contributing to this month’s strong activity and inflating prices.”
“Looking ahead to the Spring Statement, there is scope for the Government to announce further support for first-time buyers, especially as there is a significant lack of measures to help this group get on the property ladder. However, this must be done responsibly to protect borrowers from overstretching themselves.
Saffron for Intermediaries head of business development Tony Hall says: “First-time buyers are racing to complete purchases before the stamp duty changes in April, and today’s figures really hammer that home. But even with an 11% rise in homes on the market, there remains a strain on supply of new housing.”
“The last time the UK built enough homes was in 1979, when social housing was a priority. Since then, we’ve consistently fallen short. Proposed changes to affordability tests, like including rental payments, could help more buyers enter the market but also risk driving up demand without enough homes to meet it.”
“It’s clear the government is serious about the supply issue – they set out their stall last summer with the 1.5m homes target. But it’s not just about building more homes. If we’re going to solve the supply issue, we need to think beyond traditional new builds and explore alternative routes to homeownership as well.”
“For instance, there’s huge potential in repurposing underused commercial buildings in urban centres, making better use of spaces that are already there, meanwhile our research shows 64% of 18 to 24-year-olds would or already have considered pursuing a custom- or self-build project. Both present a valuable opportunity for brokers and lenders to expand their business and support borrowers in this specialist corner of the market.”
Propertymark chief executive officer Nathan Emerson adds: “With Stamp Duty changes across England and Northern Ireland due to take effect from April, we have seen an increased keenness from many people to complete as soon as possible, to typically save themselves around £2,500 pounds when purchasing an average priced property.”
“The magnitude of house price growth does typically vary across different areas of the UK; however, with inflation now standing higher at 3%, we may see this influence base rate decisions over the coming months to help maintain overall stability within the economy.”
“With an ever-growing population, all devolved governments must not only turn their attention to ensuring house building targets are delivered in the areas where there is a need, but also ensure that the right type of homes are being built in line with the shift in buyer behaviour.”