As we reflect on what has been a particularly ‘dynamic’ year for the property market, attentions are beginning to turn to 2025, and what the likelihood is of this ‘economic rebound’ continuing.
According to industry experts, all the indications are that we have reached the beginning of a price ‘turning point’, and as such, the continuation of the ‘buyer’s market’ enjoyed in 2024 looks more than likely.
Among some of the greatest indicators of this trend, are the uplift in average asking prices being noted in the capital, coupled with the notable rebalancing that has been steadily occurring in the industry’s supply and demand dynamic.
As well, the number of active first-time buyers is 13% higher than the same period last year, which gives forecasters an accurate glimpse of what is to come.
This particular statistic owes to the sense of urgency being created by the stamp duty changes, coming into play on April 1st.
As a result of this budget measure, the market is expected to enjoy a ‘January rush,’ as homebuyers look to complete their transactions before the higher rates come in.
Even after the stamp duty deadline, first time buyers are expected to continue being a major driving force for the market, with the likelihood of greater negotiation tactics being used to mitigate some of the higher costs of getting on the property ladder.
Other factors which are largely expected to bolster market activity, are the expected fall in the ratio of average house prices to annual earnings (from 8.64 in 2022 to 7.94.) This is a product of the last year’s wage growth, which has resolved some (albeit not all) of the affordability constraints that have so far been limiting housing market recovery.
All this has been helped along by the narrowing of the gap between two year and five year fixed mortgage rates. By the end of next year, these are expected to sit around the 4% mark.
This rate improvement is particularly relevant for home-owners nearing the end of their two year post-mini-budget deals (although it is maybe less of a ‘bonus’ for those home-owners whose five year 2% rates are also up in 2025.) Overall, however, the softening in mortgage rates will inevitably help deliver a welcome uplift to affordability and house prices.
Summary
With 1.15 million properties expected to be sold in the next year, and forecasts for new house price growth being their highest since 2021(4%), according to Rightmove, the backdrop looks relatively stable for home-movers looking to action their plans in 2025.
Of course, it is difficult to forecast the exact trajectory of the market with absolute accuracy, and there is always the element of historical standards casting doubt on market ‘improvements’.
As well, it is prudent to keep in mind that there might be some negating factors to the predicted housing market rebound, and one of these is the likelihood of greater competition on the portals, giving buyers greater margin for choice.
As well, interest rate cuts are expected to be fewer and further between next year, and unemployment, geographical tensions and other unpredictable factors will likely remain a significant headwind.
However, with the interplay of mortgage rates, house prices, wages and inflation all currently pointing in the right direction, and affordability and confidence on the up, there are perhaps not as many reasons for concern as there are optimism as we look to the new year ahead, and particularly against the backdrop of the last five years.