As 2024 draws to an end, it’s time to reflect on the events that have shaped the property market this year and consider how they might drive house sales through January and beyond.
It’s been a varied year across the UK during 2024 and the property market has been no exception. With the fallout of Kwasi Kwarteng’s 2022 ‘micro-budget’ still impacting mortgage rates and Jeremy Hunt’s Spring Budget arriving in March, Q1 of 2024 was a period marked by both optimism and speculation, as the housing market appeared to remain resilient despite some uncertainty about how future policy might impact the property market.
Arguably, the most talked-about Conservative housing policy was its Renter’s Reform Bill, which was intended to significantly change the law regarding rented homes.
These included a provision abolishing fixed-term assured tenancies and assured shorthold tenancies, imposing obligations on landlords, and other reforms concerning rented homes and temporary and supported accommodation.
The Conservative government eventually dropped the Renter’s Reform Bill, however many of its provisions were reintroduced to varying degrees by the Labour Party following its July 2024 election win.
The ‘Renter’s Rights Bill’ is currently in the reporting stage before a third reading in the House of Commons. The bill is expected to become law in the summer of 2025, marking a prolonged period of uncertainty and change for landlords.
The first budget from the new Chancellor of the Exchequer, Rachel Reeves, was delivered in October 2024. The Autumn Budget contained several policies that would have an immediate impact on the housing market, including an increase of the stamp duty land tax (SDLT) surcharge paid on second home purchases in England and Northern Ireland from 3% to 5%.
During all of the political movements of 2024, all eyes have been held closely on the UK’s inflation rate. In the second half of the year, inflation seemed to have fallen, hovering around the government’s target of 2%. However, in a surprise that caught many off guard, it was revealed in November that the UK Consumer Price Index (CPI) increased from 1.7% to 2.3% between September and October 2024.
The rise in inflation was partially blamed on unmercenary around the Autumn Budget and an ongoing impact of a tighter than expected labour market.
A lack of confidence following the budget had already caused mortgage rates to increase slightly despite the Bank of England’s (BoE) decision to lower its Base Rate to 4.75% (down from 5%) in November 2024.
Despite UK inflation increasing for a second consecutive month during November 2024, the BoE decided to hold the Base Rate at 4.75% on 19th December 2024.
This was disappointing news for those who were hoping for a further rate cut before the end of the year but was widely expected by the majority of commentators.
Despite being punctuated by significant political turbulence and economic uncertainty, the housing market has remained highly resilient throughout 2024.
According to the House of Commons Library,* house prices as measured by the UK House Price Index rose 2.9% between September 2023 and September 2024. House Prices across the North West increased to £225,977 in September 2024, representing a monthly change of 0.4% and an annual change of 4.8%.
Problems with the processing of house sales recorded by HM Land Registry and a general fall in available transactional data (HMRC has reported a 22% fall in 2023), have made it difficult to collect accurate information regarding property transactions covering September 2023 and 2024.
However, Bank of England data on the number of mortgages approved to finance house purchases are a leading indicator of house sales. Mortgage approvals for house purchases in October 2024 were up 42% from a year ago and up 3% in September 2024.
There were 68,303 mortgage approvals in October 2024, compared with 48,259 in October 2023.
The demand for property was further underlined by The Royal Institution of Chartered Surveyors’ (RICS’) September 2024 UK Residential Market Survey, which reported a sustained increase in market activity across all of its measurements for demand, sales and new listings.
In its November 2024 UK Residential Market Survey, RICS again reports a broadly positive outlook for the UK property market, although with a slight levelling-off in sales toward the end of the month.
The lettings market has endured a challenging year with higher mortgage rates, changes to housing legislation, and the prospect of more to come in 2025 all impacting landlords and the overall performance of the rental sector.
Since September 2024, the long-running decline in the volume of landlord instructions coming into the market has continued. By November 2024, the RICS UK Residential Survey reports a -13% net balance in landlord instructions across its respondents.
This figure is arrived at by taking the number of agents indicating a rise in landlord instructions and subtracting it from those who reported a fall in instructions.
Demand for rental properties was strong during September and October 2024, however in November RICS survey responders reported a -1% net balance in tenant demand. Seasonal trends are likely the main driver behind this fall, however, it should be noted that this is the first time since 2020 that rental demand has fallen.
It is unlikely that this represents a consistent fall in demand, as rent prices have continued to rise unabated and demand from tenants was reported at +22% in September 2024 and +19% during October 2024.
Overall, it could be said that the tone of the property market in 2024 was one of resilience in the face of prolonged speculation and change. Despite mortgage rates not falling as quickly as many had hoped, property transactions have continued to grow and buyer demand shows no sign of slowing.
The rental market has proven to be too uncertain for some landlords, however, for those who can budget for increases in SDLT for second homes and provide properties that meet proposed new standards for rental homes, there is ample opportunity to develop a profitable investment strategy over the coming years as tenant demand remains strong overall.
Lloyds Banking Group (1) forecasts modest house price growth ranging between 0% and +3% during 2025, along with a further small increase in property transactions.
The bank also notes that its forecast uncertainty remains high given the current economic environment. This is reflective of the same period last year where many commentators were optimistic about a stronger fall in inflation and lower mortgage rates for 2024.
The positive news around this forecasting is that despite inflation not falling as quickly as many had hoped and mortgage rates remaining broadly flat throughout the year, demand for property has continued to grow, as have house prices overall.
It could be argued that while commentators continue to pore over granular market data each month, buyers have adapted to the ‘new reality’ of current mortgage rates. Excluding any further seismic events like Kwasi Kwarteng’s ‘micro-budget’, it seems reasonable to expect that forecasts from lenders like Lloyds will be broadly accurate.
With some bullish analysts forecasting mortgage rates as low as 2.75% by the end of 2025 (2), others predict that rates will be closer to 6% at the year’s end (3).
The lack of certainty around mortgage rates seems to be driving a level of stoicism among buyers. The increase in mortgage approvals during 2024 suggests they are more confident in accepting mortgages at their current rates rather than holding off on moving and taking a risk on rates falling next year.
This attitude is also potentially being driven by the contents of the Autumn Budget, delivered by Chancellor Rachel Reeves in October 2024.
One of the major considerations for buyers in 2025 will be changes to the duty paid on land tax. During her budget speech, Rachel Reeves announced an increase in stamp duty surcharge for second homes from 3% to 5% as of midnight of 30th October 2024. This announcement came as a shock to some investors,
Arguably the more pressing policy changes for home buyers in 2025 were the announcements that:
This will add further impetus for buyers to act quickly to complete their move early in 2025, adding further activity during the expected Christmas rush in house sales.
Those looking to sell the property will need to act quickly to ensure they are on the market in good time to attract buyers as competition heats up.
The impact of high numbers of landlords exiting the rental market in 2024 will continue to be felt in 2025. The reduction in rental stock is currently helping to drive higher rental demand from tenants, as well as an increase in rental prices.
Some analysts expect this trend to continue throughout 2025, while also suggesting that rents will reach an ‘affordability ceiling’ that could limit rental growth between the latter part of 2025 and 2028 (4).
Landlords have encountered several challenges in recent years, including increased BTL mortgage rates, increased SDLT surcharges on second homes and long periods of uncertainty around rental market reform.
Since coming to power, the current Labour government has introduced its anticipated Renter’s Rights Bill after the Conservative Party scrapped its own Rental Reform Bill before the 2024 general election.
The Renters Rights Bill contains several milestone policies, including the abolishment of Section 21 evictions and the application of ‘Awaab’s Law’ to the private rental sector. You can find the full updated details of the Renter’s Rights Bill here.
Further reform to the rental market is expected with the introduction of the Government’s new energy performance certificate (EPC), which will require rental homes to have an EPC rating of C or above. You can read our guide to the new EPC requirements and how to prepare for them here.
Although the intention to introduce these reforms has been widely discussed, a formal announcement and timetable for the implementation of changes has yet to emerge.
With the scrapping of the Conservative Party’s Rental Reform Bill and no fixed timeline for the introduction of Labour’s plans, landlords are facing a choice between waiting for further details to be announced (and risking not having time to address any required changes to their properties), investing in renovations or selling rental properties that do not meet the proposed new EPC threshold.
Although these challenges have been enough to cause some landlords to exit the rental market, the reduction in stock has generated high tenant demand and increased rents. Savvy landlords who can budget for increased stamp duty payments and provide properties that meet the higher EPC threshold can still earn healthy returns on their rental investments.
A significant proportion of landlords exiting the market are choosing to sell their properties at auction, which presents an excellent opportunity for buyers to expand their portfolios quickly. It remains to be seen how BTL mortgages will be impacted by the news that the Base Rate was held at 4.75% in December 2024, but with mortgage rate decreases stalling rather than increasing, it seems unlikely that the New Year will bring significantly higher rates of lending.
With demand for property continuing to grow and mortgage rates remaining relatively stable despite a potentially volatile political landscape, there is little to hold buyers back as they consider purchasing their next home in the new year.
With millions of buyers set to approach the property market this January, sellers will do well to list their properties quickly to ensure a quick sale – especially if they are relying on the sale to finance an onward purchase.
Landlords will be considering their own options in light of anticipated rental reform, but it is clear that the rental market is evolving rather than disappearing. Whether exiting the market or expanding their portfolio during 2025, landlords will need to act quickly to take advantage of the present rush in rental property sales.
Renters will continue to face the challenge of reduced rental stock, meaning that those looking to move home in the new year should act quickly to ensure they are ahead of the competition.
Whatever your financial or property needs, Edward Mellor has 40 years of experience as a leading property agency. We’re ready and waiting to hear from you to help you along your property journey throughout 2025 and beyond.
Contact us today – and let’s get you moving!
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3 https://www.experian.com/blogs/ask-experian/mortgage-rates-forecast/
