The Halifax House Price Index in the UK increased by 3.0% year-on-year in January 2025, marking the slowest pace of growth since July. This was a slight easing from the upwardly revised 3.4% recorded in December.
UK house price growth falls to six-month low
On a monthly basis, house prices rose by 0.7%, rebounding from a 0.2% decline in December and surpassing the expected 0.2% gain. The average property price reached a new record high of £299,138, highlighting the continued resilience of the housing market despite ongoing affordability concerns.
Amanda Bryden, Head of Mortgages at Halifax, noted that "The UK housing market started the year on a positive note, with average prices rising by 0.7% in January, more than recovering from December’s slight dip." The steady recovery in prices is indicative of a market that is finding its footing despite broader economic challenges. While affordability remains a persistent issue, there are positive signs of market strength, such as strong mortgage demand and resilience in certain regions.
Outlook for this year
Several factors are expected to support modest house price growth throughout 2025. The Bank of England's recent rate cut is likely to provide some relief for borrowers, making it easier for people to access mortgage finance at more affordable rates. Additionally, steady growth in household earnings is helping to maintain purchasing power, even in the face of rising living costs. Furthermore, the UK continues to face significant supply shortages in the housing market, with a lack of new homes being built to meet demand. This ongoing supply-demand imbalance is expected to put upward pressure on prices, even as buyers contend with high affordability constraints.
Market still shows resilience
As a result, while the pace of growth in house prices is expected to remain slower than in previous years, the market is still showing resilience. Economic factors such as interest rate adjustments, household income trends, and persistent housing supply challenges are likely to play a critical role in determining the trajectory of the housing market in the months ahead. Although the rate of growth may ease further, the fundamentals supporting the market suggest that moderate price increases could continue throughout 2025.
