It’s only March, but the housing market is already showing strong positive momentum for the year ahead. Mortgage costs had been edging upwards at the end of 2024, but the Bank of England’s base rate cut last month reversed that trend – and analysts expect more reductions in the next few months. As a result, Strutt & Parker sees a significant shift in activity as buyers’ confidence improves and sellers capitalise on these trends.
Lower interest rates translate to lower mortgage rates, which are bringing people back into the market. Many potential buyers, who had been waiting for a decrease in borrowing costs, are now actively looking for a new home.
Demand continues
Demand for large, detached homes with big gardens has been particularly strong, and continues to outpace supply.
Strutt & Parker’s data reflects this positive trend. In January, their Country House team experienced a 30% increase in prospective buyers year-on-year, highlighting the growing interest in this segment.
The surge in activity isn’t limited to detached country homes. Total transactions in the fourth quarter of 2024 exceeded 300,000 – the strongest performance since 2022. House prices grew by 4.6% in 2024, according to the ONS, and growth accelerated in the second half of the year.
Matt Henderson, a residential research analyst at Strutt & Parker, notes a lot of the growth seen in 2024 was driven by the release of pent-up demand from those who were keen to move but were unable or unwilling to due to high and unstable debt costs over the previous 18 months. This trend is expected to continue over 2025 as confidence builds and debt costs come down.
The lettings market has seen continued growth, with rents increasing 9% over the year. Upward pressure is likely to continue as the Renters’ Right Bill and recent changes to stamp duty tighten supply within the market. Growth was more heavily weighted towards flats in the Prime Central London market, where new lets increased by 8%, with apartments now making up 91% of rentals.
Prices recover
The return of buyers will drive a positive cycle, pushing up prices and encouraging more sellers to enter the market. This momentum is likely to build through the year, especially if, as expected, the Bank of England continues to cut interest rates.
Prime Central London presents a slightly different picture. The Super Prime (£10m+) market has been relatively quiet, though sales below that price point have seen healthy growth. The recent decline in the pound could attract more international buyers, whose arrival would further boost sales in this sector of the market.
The political landscape may also now favour an increase in activity. Buyers who had been sceptical about entering the market, particularly at higher price points, before the UK Budget and US Election last autumn, now know the consequences of those events and can make decisions accordingly.
The Spring Statement later this month will provide further certainty. While Chancellor Rachel Reeves has promised not to make any major changes to tax policy, the recent deterioration in the UK’s financial situation could force her hand.
Overall, Strutt & Parker is optimistic about 2025. January saw a surge in new properties come to market, particularly in the upper price brackets. While buyer numbers are currently slightly down, those actively looking are serious and ready to transact.
For more information and to stay abreast of Strutt & Parker’s market view, please visit: struttandparker.com