Is it time to invest in city apartments again?
UK house prices demonstrated remarkable resilience in 2024, finishing the year with a 4.7% annual increase in December, according to the latest Nationwide House Price Index. The average UK home price reached £269,426, approaching the all-time high recorded in summer 2022.
The housing market showed unexpected strength despite ongoing affordability challenges, with prices rising 0.7% month-on-month in December, following a 1.2% increase in November. This positive momentum came despite higher mortgage rates, which remained around 4.5% for much of the year – significantly above the 1.5% rates seen in late 2021.
Northern regions outpace southern counterparts
A clear north-south divide emerged in the housing market performance, as highlighted in the report. Northern regions consistently outperformed their southern counterparts, with Northern England recording a robust 4.9% annual price growth. Northern Ireland led the UK for the second consecutive year with a remarkable 7.1% price increase, while the North of England saw prices rise by 5.9%.
Robert Gardner, Nationwide’s chief economist, noted, “Mortgage market activity and house prices proved surprisingly resilient in 2024 given the ongoing affordability challenges facing potential buyers.” He highlighted that activity levels increased throughout the year, with mortgage approvals exceeding pre-pandemic levels toward year-end.
In contrast, southern regions experienced more modest growth, with an overall increase of 2.2%. East Anglia recorded the weakest performance nationwide, with prices rising just 0.5% over the year. London saw a moderate 2% increase, with average prices in the capital reaching £525,535.
Terraced homes lead the way
Looking at property types, terraced houses emerged as the strongest performers, with prices rising 4.4% in 2024. Flats showed signs of recovery with a 4% increase – their best performance since 2021. However, detached homes maintained their long-term advantage, having risen nearly 27% since early 2020, compared to just 15% for flats.
Market outlook
Looking ahead to 2025, Gardner predicts some market volatility due to upcoming stamp duty changes, which are expected to drive increased transaction activity in the first quarter, particularly in March.
“Providing the economy continues to recover steadily, as we expect, the underlying pace of housing market activity is likely to continue to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth. The latter is likely to return to the 2-4% range in 2025 once stamp duty related volatility subsides.”
Meanwhile, Holly Tomlinson, financial planner at Quilter, noted the “remarkable” performance but suggested struggles will continue for first-time buyers.
“First-time buyers remain a critical part of the market, but affordability challenges are hitting them particularly hard,” she said. “The combination of elevated house prices, higher borrowing costs compared to a few years ago, and persistent inflation means saving for deposits remains a significant hurdle. The looming changes to stamp duty, due to come into effect on 1 April 2025, are likely to make purchasing even more difficult for this group, adding further costs at a time when every penny counts.
The struggles of first-time buyers have a ripple effect across the housing market. Without this crucial cohort entering the ladder, the market risks becoming ‘glued up,’ as chains stall and transactions slow. Existing homeowners looking to sell and move up the ladder rely on the activity of first-time buyers to create liquidity at the entry level, and their absence could further dampen broader market recovery.”
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