This week oscillated around the spring budget and the small issue of funding, be it for more affordable housing, replenishing local authorities’ depleted coffers or training and recruiting construction workers. The government’s mission to boost growth through building is clearly paramount to them winning the next election. Their self-imposed new homes target, already deemed improbable, may not be hit but they will build on existing numbers. Short term, their attempts may prove fruitless but as inflation and rates normalise, expectations are they will end their term strongly. Global shocks permitting. Welcome to another UK Property News Recap – 28.03.2025.
The UK is revealed as having the highest property taxes across the entire developed world
According to Ryan, a global tax services and software provider, the UK came out in pole position for having the highest property taxes across the entire developed world, the equivalent of 3.7% of property taxes-to-gross domestic product in 2024. The UK’s ability to draw down via property taxes is significantly higher than the average across the developed world at 1.7% and the 2.7% average for the G7. Another reason, to question investment in “England’s green and pleasant lands” in favour of further afield.
Higher rates leave a lasting impact
Higher rates knocked on households’ doors; increasing overall costs from £197.9bn in 2023 to £217.5bn in 2024. Savills found mortgage borrowers’ interest payments jumped 25%, from £39.2 bn to £49.2 bn. For those still left in the rental game, increases were passed on to renters who experienced a 9% rise in payments to £80.7 bn. Lower rates may be forthcoming by the end of the year, but the cost of living has changed so significantly for households up and down the country that it’s unlikely people, at least in the short term, will feel any great benefit.
£1.6bn to fill UK potholes
The government has promised an additional £1.6bn to fill councils’ potholes with the caveat that local authorities will lose 25% of their funding, if no progress is made.
75% councils plan to double council tax on second homes
75% of councils in England plan to double council tax on second homes in a pretence of freeing up homes for locals who can no longer afford them. In reality, it’s just another mechanism to replenish their depleted funds as locals are now priced out of their own market.
£600m to be invested on boosting construction numbers with training
Rachel Reeves attempted to plaster over the construction workers crack by announcing £600m to be invested in skills training for the construction industry. This, she hopes, will boost engineers, bricklayers, electricians and carpenters numbers by 2029 to 60,000.
This will help with the job in hand but it won’t be enough to finish it.
House prices become more affordable through wage growth
In England and Wales a 20% rise in average earnings helped affordability levels in 2024 as median house sales prices, over the same time, only rose by 1% since 2021. As a result, the ONS found housing affordability improved in 289 of the 318 local authorities in England and Wales and worsened in 28 from 2023. The worst hit was the East Midlands, where prices had room to grow while the 10 largest decreases, per local authority, all occurred where prices are dear, in London.
£2bn funding boost for affordable housing leaves questions
In the hope of deflecting from welfare cuts, Rachel Reeves jumped the gun this week with a £2bn affordable homes announcement three months ahead of schedule. This, we were told, would enable a further 18,000 affordable and social homes, which would start construction by 2027 and complete by the end of the parliament. The issue with this is it is short £400m on the average annual spend. Another announcement is scheduled for June, leaving many hopes pinned on further investment to follow.
Bellway springs back into business
The developer Bellway had a “spring” in its step following its interim trading update, which showed an uptick in completions, up 11.9%, along with the group’s average selling price, which nudged up from £309,278 in 2024 to £310,581 on Tuesday. Group expectations remain steadfastly optimistic for this momentum to continue, as the year progresses.
Vistry struggles to shake off their southern division woes
The developer Vistry, however may achieve, for another year, its customer satisfaction 5-Star HBF guarantee, but the group’s profits nose dived in 2024, as Vistry continued to feel the effects of the southern division mismanagement.
The Group significantly underperformed financially in 2024, reporting adjusted profit before tax of £263.5m down from £407.3m in 2023.
Building safety levy delayed by 18 months
Leaseholders lost out once again in favour of developers who were given an additional 18 months to accustom to the impending building levy so they could factor in the “additional cost into their financial planning.” The government and developers are hoping for rates to drop further, to encourage more “movement” later in the year to help balance the books.
Two year fixed mortgage rates fall below five year rates
For the first time since 2022, two year loans became cheaper than a five year fixed mortgage causing borrowers to return for a short term fix. Many are gambling on inflation reducing by the end of the year which along with the government’s need for economic growth, will lead to cheaper rates on which borrowers can fixate on, long term.
House prices inflation slows to 1.8%
Previously dormant sellers who had been biding their time in anticipation of a market in full bloom sprung into action according to Zoopla’s HPI for February 2025. This, however, increased competition which led to more moderate price growth, depending on where you are in the country. For London and the south, where prices historically are high but yield little return – many banking on capital appreciation – the recent increases in taxation and costs continue to dent prices while the North West and Scotland saw above average growth. Demand also waned in these areas as the recent momentum from first time or second home owners to beat the stamp duty holiday deadline petered out.
January house prices continue to edge up
According to ONS data, the average UK house price annual inflation increased from 4.6% in December to 4.9% in January 2025, making the average UK house price £269,000, £13,000 higher than 12 months ago. In England, the North East was the region with the highest annual house price inflation over the past 12 months. Prices increased 9.1% while London came last with growth of 2.3%. Prices here still facing a hefty climb before they reach the heady heights achieved in 2022.
Looking across the UK; average house prices in the 12 months to January 2025 all increased:
England was up 4.8% to £291,000, Wales up 6% to £210,000 and Scotland increased 4.6% to £187,000. Meanwhile in Northern Ireland in Q4 2024 prices rose 9.0% to £183,000.
UK annual rental inflation slows for another month
Annual rental inflation slowed in February 2025 from 8.7% in January to 8.1% according to the ONS. Londoners felt the inflation squeeze the most, annual inflation here rising to 9.9% while tenants in Yorkshire and the Humber were relatively spared, annual inflation increasing by 4.8%.
Average annual rental rises across the UK to February 2025:
England up 8.3% to £1,381
Wales up 8.5% to £785
Scotland up 5.8% £998
In Northern Ireland rents increased up 8.1% to £832 in the 12 months to December 2024.
The OBR marks Rachel Reeves’s Spring Statement
According to the OBR, transaction volumes are due to stabilise after the market returns from its stamp duty holiday, however recent planning reforms are expected to boost housing transactions on average by 4% in the last three years of the forecast.
As for interest rates: given around one-third are still to refix their mortgage since higher rates kicked in since mid-2021. The OBR expects overall rates to peak at 4.7% in 2028 where they will then linger till the end of the forecast. This will come as a blow to many looking for a financial break to enable homeownership given house price rises are also set to steadily increase, on average by 2.5%, after an initial spurt in 2025 of 2.8%
Cladding over building
A new YouGov poll revealed 52% of people surveyed would prioritise cladding removal over house building.
Women were found to be twice as likely to vote for cladding removal while men were divided between the two. Furthermore, Londoners, Scots and young people were found to be more inclined in the opposite direction. Many are still pursuing the dream of homeownership which currently lies just out of financial reach.
Network Rail set up a new property company
Off the back of the Spring Statement, Network Rail announced plans to set up a new property company to build 40,000 homes on its rail estate over the next decade. At the same time, a new cross-government taskforce plans to release surplus public land for housing, with unused Ministry of Defence sites to be among the first to be released.
Transaction volumes increase as the stamp duty holiday comes to a close
UK monthly property transactions got a stamp duty bump as buyers rushed to complete in February 2025 before the taxation holiday came to a close. UK residential transactions in February 2025 were 28% higher than February 2024 and 13% higher than January 2025 at 108,250.
And that concludes another UK Property News Recap – 28.03.2025. If you have any comments or suggestions, please get in touch.
