UK house prices surged in January, as buyers rushed to snap up properties ahead of the stamp duty increases being implemented from 1 April 2025 onwards.
The January UK Halifax House Price Index was released on Friday, with the average property price surging to a new record high of £299,138 (€358,822) last month.
House prices inched up 0.7% in January, compared to a fall of 0.2% in December. On an annual basis, prices rose 3% in January 2025, compared to 3.4% in the same month last year.
This was mainly driven by more buyers trying to complete house purchases ahead of the planned stamp duty increases coming into effect in April. From 1 April this year, the temporary threshold increases to Stamp Duty Land Tax (SDLT) will end. This is expected to have the greatest impact on first-time home buyers.
At the moment, first-time buyers do not pay any stamp duty while buying homes worth £425,000 (€509,796). However, this threshold is set to decrease to £300,000 (€359,856) from April onwards.
Northern Ireland still experienced the strongest house price increase on an annual basis, with house prices rising 5.9% in January, although prices slowed from December’s 7.3%. The average house in Northern Ireland set buyers back by approximately £205,473 (€246,469) in January.
In Wales, house prices inched up 3.6% on an annual basis in January, with buyers having to pay about £227,397 (€272,767.3), on average, for a property.
In January, Scotland saw a softer rise in house prices, compared to other parts of the UK, at 2.4% on an annual basis. The average Scottish property was priced at about £210,690 (€252,726.8) last month.
Coming to England, property prices in the North East were higher than the North West in January on an annual basis, seeing a rise of 5.2%, with the average property price coming up to £178,696 (€214,349.4). London remained the most expensive city for house prices in the UK, with the average property costing about £548,288 (€657,682.4), which was a rise of 2.8% on an annual basis.
Struggles with affordability
Amanda Bryden, head of mortgages at Halifax, said in the January report: “Affordability is still a challenge for many would-be buyers, but the market’s resilience is noteworthy. There’s strong demand for new mortgages and growth in lending. With a stamp duty increase looming, some of this demand may have come from first-time buyers eager to complete transactions before the end of March.
“Despite geopolitical uncertainties, and waning consumer confidence, other key indicators look fairly positive for the housing market. The Bank of England has made its first base rate cut of the year, and there are probably more to come. Household earnings are expected to continue outpacing inflation – albeit that gap may narrow – easing some of the financial pressure still being felt from the cost-of living squeeze.
“As things stand, mortgage rates are likely to hover between 4% and 5% in 2025, influenced by both global financial markets and domestic monetary policy. Over the past year, buyers have been getting used to this new normal, understanding that rates are unlikely to return to the historical lows of 1%.”
Housing supply lagging
However, Bryden highlighted that the main issue in the housing sector was still lagging supply, which could boost house prices further this year.
Alice Haine, personal finance analyst at Bestinvest by the online investment service Evelyn Partners, said in an email note: “While property prices are expected to increase in the run-up to the stamp duty change deadline at the end of March as buyers and sellers race to beat the tax hike – what happens from that point remains uncertain. With recession chatter back in the air and buyers facing a higher tax bill on their purchase, house price growth is likely to be more subdued if sellers are forced to cut asking prices to get deals across the line.
“The start of April, the point at which employers start paying a higher rate of National Insurance on employee salaries and a higher minimum wage, could be a crunch point for the economy if companies struggle to absorb the extra costs and choose to pass those costs onto consumers.”
The ongoing cost of living crisis in the UK has also contributed to several homeowners struggling to afford mortgages.
Haine pointed out: “Add in higher household bills and an ever-higher tax burden, a result of frozen personal tax thresholds, and it’s understandable that some prospective and existing property owners are still feeling under pressure. Whether it’s a buyer struggling to raise a deposit for their first property or an existing homeowner finding it hard to meet their monthly repayments, the mortgage struggle is far from over and that can have implications for house prices.”
Haine advised buyers looking for a new mortgage to carefully analyse offers and approach reputable brokers to help them make the right decision.
“Lenders can be guilty of using more attractive rates to mask high arrangement or product fees. Calculating the overall cost of the product is imperative to determine if one product works out cheaper than another,” she added.
