Housing market resilient despite ongoing affordability challenges

Lender Nationwide reports it was encouraging that activity levels in the housing market increased over the course of 2024. The number of mortgages approved for house purchase each month rose above pre-pandemic levels towards the end of the year. Similarly, after starting the year registering small annual declines, the pace of house growth moved firmly into positive territory, approaching 4% in November.

Upcoming changes to stamp duty are likely to generate volatility, as buyers bring forward their purchases to avoid the additional tax. 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. This will make it more difficult to discern the underlying strength of the market.

Nationwide adds that providing the economy continues to recover steadily, it expects, 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, where the latter is likely to remain broadly in the 2-4% range in 2025.