As we reflect on 2024, the new homes market was a landscape of cautious optimism and persistent challenges, particularly around affordability and supply constraints. Looking ahead, 2025 is shaping up to be a year where UK house hunters may have more negotiating power and potential increase in sales. We spoke to Ella Pearson, Head of New Homes, to gain her insights on the year ahead.
Affordability remains a significant concern for many, despite a greater availability of stock. Mortgage rates, while down from the highs of July 2023, are still significantly higher than pre-pandemic levels. This continues to impact buyers' purchasing power and overall market dynamics.
There is a growing emphasis on sustainable building practices and innovative construction techniques to improve efficiency and reduce costs. Developers who adopt these practices are likely to gain a competitive edge in the market. Sustainability is not just a trend; it is becoming a necessity as buyers increasingly prioritise eco-friendly homes.
With a wider selection of homes and longer selling times, buyers will have the upper hand. House prices are predicted to rise by 4%, aligning with the long-term average. This stability offers a sense of predictability in an otherwise fluctuating market. Mortgage rates are anticipated to drop, with five-year and two-year fixed rates potentially falling to around 4.0%, thanks to expected cuts in the Bank of England Base Rate. However, external factors like geopolitical events and inflation could influence these rates. Two-year fixed deals might become more appealing as their costs align with five-year rates, offering better flexibility. With many homeowners fixed-rate mortgages ending in 2025, there may be a focus on remortgaging. Those who secured low rates in 2020 may face higher costs, while those with higher rates from 2022 or 2023 could benefit from lower repayments.
From April 1, stamp duty rates will increase, potentially raising buying costs for some. The current stamp duty exemption for first-time buyers on properties priced up to £425,000 will revert to £300,000, This has led to a rush among buyers to complete purchases before the deadline.
Developers are facing significant planning challenges, which impact the supply of new homes. These challenges include navigating complex regulatory environments, securing necessary approvals, and addressing community concerns. The planning process can be lengthy and unpredictable, often leading to delays and increased costs. This has made it difficult for developers to meet the high demand for new homes, exacerbating supply constraints. Overcoming these hurdles will be crucial for developers aiming to capitalise on the market's potential.
Optimism appears to be in short supply at the start of 2025, but there are glimmers of light on the horizon. A growth mindset and a positive attitude can help overcome external circumstances which might be less than favourable. Here are a few reasons for optimism this year:
The Future Homes Standard is set to transform how we build. This standard focuses on reducing carbon emissions and improving energy efficiency, ensuring that new homes are not only environmentally friendly but also cost-effective for homeowners in the long run.
As we see the Government's commitment to streamlining the planning process and the planning reform finally happening, this should help builders get more homes out of the ground. This reform aims to simplify the approval process, reduce bureaucratic delays, and make it easier for developers to navigate the regulatory landscape, ultimately increasing the supply of new homes.
New building safety regulations mean buyers can have even more confidence in new builds. This focus on quality means regulations will ensure that homes are built to the highest standards, providing safety and peace of mind for homeowners.
The wider variety in housing stock will ensure that there are options available for different demographics, from young families to retirees, making it easier for everyone to find a home that suits their needs and meeting the diverse needs of communities at the same time.
As we leave 2024 behind, it is encouraging to reflect on the progress made despite some of the headwinds. While we can expect some continued volatility in 2025, the outlook suggests it will be at much more tolerable levels. The key message is that consumer confidence has the potential to unlock the momentum already present in the market.
