The UK housing market finished 2024 with prices strengthening, according to data out this morning from Nationwide Building Society.
House prices were up 4.7% year-on-year in December, improving from the 3.7% increase in November, with prices rising over 2024 after falling in 2023.
The average UK house price of £269,426 is close to the all-time high recorded in summer 2022.
On a monthly basis, which is seasonally adjusted, prices rose 0.7%, adding to the 1.2% gain the month before and higher than the 0.1% rise than economists predicted.
Prices are likely to continue rising for the first three months of 2025, said Robert Gardner, Nationwide's chief economist, which would take the average price to a new record high.
The reason is that house buyers are likely to look to speed up purchases ahead of upcoming changes to stamp duty announced in the Budget.
"This will lead to a jump in transactions in the first three months of 2025 (especially in March) and a corresponding period of weakness in the following three to six months, as occurred in the wake of previous stamp duty changes," Gardner said.
"This will make it more difficult to discern the underlying strength of the market."
If the UK economy proves solid in the first quarter and continues to recover, as Nationwide expects, Gardner said the underlying pace of housing market activity is likely to similarly strengthen gradually.
This should happen, he said, as affordability should improve if interest rates are cut and earnings outpace house price growth.
House price growth is likely to return to between 2% and 4% in 2025 once the volatility over stamp duty subsides.
Economist Elliott Jordan-Doak at Pantheon Macroeconomics noted that the Nationwide index is the first house price index available for December, and shows that house price inflation continued to gain momentum in the back end of the year as the MPC cut rates.
"All told, the Nationwide index performed strongly in 2024, and December’s rise means the index grew in annual terms in 2024 after falling in 2023," he said.
He noted that forward-looking indicators of prices suggest that house price inflation will accelerate over the year ahead, with the RICS survey consistent with year-over-year growth in house prices of around 5%.
Looking at the path for Bank of England borrowing costs, he noted that the overnight swaps market upon which mortgages are priced has "bounced around" since the Budget in October and the US election in November.
"Current market pricing suggests that affordability will barely improve between now and the end of 2025, which will keep a lid on demand over the year ahead—we expect the average quoted 75% LTV 2-year fixed rate mortgage interest rate to stay around 4.6% in 2025.
"But, we think the MPC will cut three times this year, more than the market is currently priced for. This should lead to borrowing costs falling for mortgagors, boosting demand."
** Update: Adds further comment and detail **