House price inflation has moved from brisk to breathless in the most affordable parts of the country. With the price of the average home in North East England jumping by 9.1% in a year, and Wales, the East Midlands and North West England all seeing annual inflation of 6% or more, things are moving fast.
Such rapid price growth may not last, and a rebalancing is likely in coming months. Scotland, after setting a blistering pace in 2024, has settled back to an inflation rate of 4.6%. This suddenly looks almost pedestrian compared to England’s cheaper regions.
England’s North-South divide is as stark as ever, even though average London prices have leapt back into growth territory after stagnating in 2024.
The surge in the prices paid in January is likely to be partly a product of the Stamp Duty increases due to kick in next week. Many buyers keen to beat that deadline and save thousands of pounds in tax may have ended up paying thousands of pounds more for the home they wanted.
Once this distorting factor falls away, the future course of the market will be determined by more conventional drivers like rent prices and interest rates.
At present soaring rent increases continue to nudge many tenants into buying their first home. With economic growth slowing and consumer inflation easing, the Bank of England may be tempted to cut the base rate again in coming months, and the prospect of cheaper borrowing should keep nudging property prices upwards.
The supply of homes for sale is healthy, especially at the top end of the market. We’re seeing lots of high-value homes coming onto the market – even in highly sought-after, prime postcodes – and this abundance is putting buyers firmly in the driving seat.
But rather than chasing postcode prestige, many buyers are now prioritising space, quality of life, and affordability, as part of a marked shift in mindset shaped by borrowing constraints and a more cautious economic outlook. London’s slow growth isn’t a sign of distress, but of discernment, with high-value buyers taking a more strategic, long-term view.
The market is quietly recalibrating. What we’re seeing is a shift from reactive to considered decision-making, as buyers across the spectrum reassess what matters most.
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