House prices rose by 1.2% in November, taking annual growth to 3.7%, according to Nationwide. This is the fastest monthly house price growth since March 2022. This could see annual house price growth marginally above our forecast for 2024.

The market was also very active in October, with the number of completed transactions 3% above the 2017-19 average. This is the first time they have exceeded the pre-pandemic average – the most recent ‘normal’ market – since December 2022. Mortgage approvals were also the highest they’ve been since August 2022.

This strong activity is the culmination of changes through the summer which encouraged buyer confidence. The General Election in July provided stability for buyers. This was further compounded by the Bank of England making the first cut to the base rate in August which led to mortgage interest rates being cut. Uncertainty ahead of the Budget in October led to buyers and sellers both pressing ‘pause’ while the economic direction of the new government was announced.

The reinstatement of lower stamp duty thresholds from 1st April 2025 will boost transactions over the next few months. It gives buyers, especially first time buyers, an incentive to complete purchases during Q1 to avoid additional tax. This will be transactions brought forward to beat the deadline rather than prompting much additional activity.

Heading into 2025, economic indicators are mixed. Some inflationary risks remain, especially around energy prices, and swap rates are higher than they were pre-Budget. Mortgage rates are still expected to fall, but the Bank of England is unlikely to cut the base rate again until February 2025 at the earliest. The pace of interest rate cuts in 2025 will determine the strength of the housing market over the course of the year.

Recent net migration estimates from the ONS indicate that population growth has been faster than expected, driving up demand for homes. The most immediate effect of high migration is on the rental market. But higher than expected population growth also has implications for house prices and the need to increase housebuilding.

Land Registry data shows that the highest house price growth remains across Scotland, including Inverclyde (14.4%) and East Dunbartonshire (8.3%). The greatest price falls were in Kensington and Chelsea (-6.6%) and in southern coastal markets, including Torridge (-6.0%) and Dover (-5.7%).

Annual rental growth across the UK in October was 3.9% according to Zoopla, a further deceleration from September’s annual growth figure of 4.3%. This slowing comes despite falling rental supply, according to the RICS survey, suggesting tenants have limited capacity for continued growth. Rents are decelerating in most regions, with the slowest market being London (1.3%) where rents are the highest. Some more affordable markets are, however, seeing continued rental growth, such as the North East (up monthly from 8.6% to 8.7%) and the West Midlands (up from 5.4% to 5.5%).

Supply remains a critical determiner for rental growth in many markets. The stamp duty changes in the budget are unlikely to encourage more landlords to enter the market, so this pressure seems set to remain.