News that stamp duty bills are rising for most buyers from April 1st has brought a few more house hunters out in December than usual. But for most minds are elsewhere, meaning that gleaning much from the property tea leaves can be difficult at this time of year.
With the Christmas break in sight this, our last Roundup of 2024, looks back over the year and ahead at what we can expect in 2025.
More new homes
The new National Planning Policy Framework (NPPF) was introduced as an early Christmas present last week. Housing targets, based on the new approach to housing need first mooted in July, are now mandatory. The word of the day appears to be flexibility, with the NPPF confirming that councils will be required to review green belt boundaries if they cannot meet housing need from non-green belt land first. Any land defined as ‘not strongly contributing’ to the green belt could be brought into scope.
There appears to be more flexibility too on affordable housing targets, with a blanket affordable housing requirements of 50% on some sites proposed in the July draft. New plans look instead at a 15% uplift over the current highest policy requirement, with the 50% being used as a cap rather than threshold.
But planning reform is just one part of the housing delivery puzzle, we’ll need a Christmas miracle and plenty more construction elves to ramp up delivery to meet target in the short term.
Christmas present
Those hoping to put a new home under the Christmas tree this year will be paying more than they were a year ago. All the key house prices indices are reporting growth. The Nationwide index showing prices have risen 3.7%, the Land Registry 3.4% and Halifax 4.8% in the last 12 months. All marginally higher than our 2024 expectations back in May, with JLL forecasting growth of 2% growth in 2024.
We are seeing more activity in the sales market. The number of homes sold in October 2024 was the highest since 2020, with the number of sales up 23% on 2023 levels. This follows a similar trend to the one we’ve been observing for a few months now, with the number of transactions recorded between April and October 2024 up 11% on the same period a year earlier. Mortgage approvals are on the rise too. With the latest figures for October the highest since 2022.
For rents the ONS Index, which includes new and existing tenancies, is showing rental growth of 9.1% in the 12 months to November, with Homelet (new lets only) reporting an annual increase of 2.2%.
What do we predict for 2025?
A busy start to Q1
First-time buyers can save up to £6,250 and existing owner occupiers up to £2,500 in SDLT when buying a £500,000 home before 1 April 2025. Expect a flurry of deals pushed through in Q1 2025 (and a bit of a lull post). But buyers will need to get their (ice) skates on to secure a home before the deadline with less than a third of homes going under offer in January traditionally completing before the start of April.
House prices will rise
The latest monthly survey from the RICS points to further growth in prices as we move into 2025. Reported as a balance of opinion (a positive balance means more saying they think they’ll rise than fall) a net balance of +47% of respondents expected prices will rise over the next 12 months, with views on price growth positive for all UK regions.
Demand appears to be rising too, with a net balance of +12% of agents reporting an increase, the fifth consecutive month posting a positive reading. This is also reflected in the outlook for sales activity, with a net balance of +19% expecting more sales over the next three months and +33% over the next 12.
Here at JLL we expect house prices will rise by 20% over the next five-years, with rents expected to increase 17% over the same period. To read more on our forecasts click here.
Rental growth returns to low single digits
For lettings, tenant demand remained broadly flat in November, with the RICS reporting a net balance of -1%. This has grabbed some headlines being the first negative reading on tenant demand since 2020. Despite a drop off in demand (to be fair November is never a busy month for lettings) more agents reported a further fall in landlord instructions, meaning the outlook for rental growth remained positive. A net balance of +29% of respondents to the survey expecting rents to rise in early 2025.
Mortgage rates will fall (a bit)
Despite average mortgage rates edging up over the last couple of months expectations remain that we’ll see further rate cuts as we move into 2025. Five-year swap rates edged down in early December, 44bps lower than they were a year ago and down on recent post-budget highs. As expected, the Monetary Policy Committee held rates at 4.75% at their 19th December meeting, but consensus forecasts suggest we should see three further 25bps drops in the bank rate in 2025.
Mortgage activity increases
UK Finance have just released their forecasts for 2025. They expect gross mortgage lending will rise 11% next year. Remortgaging is expected to rise 30% with lending for house purchase up 10% to £148 billion. Only new buy-to-let lending is expected to fall, with lending of £9 billion forecast, 7% lower than 2024 levels. But this follows a stronger than expected year for new buy-to-let lending, with borrowing expected to end the year 13% up on 2023 levels.
Here’s to 2025
That’s a wrap on 2024. All that’s left is for us to wish you all a very merry Christmas and all the best for 2025 from us here at JLL Residential.
