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Gloucestershire Business News

SPECIAL REPORT: Will house values climb in 2025?

The adage that property investment is safe as houses appears to be – modestly – holding true at the start of 2025, given today's fresh data from the biggest UK mortgage lender which shows average home values had risen by 4.1%, year-on-year, this January.

Perhaps in keeping with sun's attempts to break through, the Nationwide's new figure for the start of the year identified a "modest slowing" compared with December, with a month-on-month 0.1% increase after taking account of "seasonal effects".

The new figures from the UK's most sizeable building society mean average price of a UK home now stands at £268,213.

Robert Gardner, Nationwide's chief economist, said: "The housing market continues to show resilience despite ongoing affordability pressures."

While there had been a modest improvement over the last year, he added that affordability remains stretched by historic standards: "A prospective buyer earning the average UK income and buying a typical first-time buyer property with a 20% deposit would have a monthly mortgage payment equivalent to 36% of their take-home pay - well above the long-run average of 30%."

With December's data addition now revealing that house prices remain high relative to average earnings, the house price to earnings ratio for first-time buyers (FTBs)was 5.0 at the end of 2024 - a clear step up from the long-run average of 3.9.

That discrepancy, industry commentators say, signals no easing in the deposit hurdle FTBs must clear.

Mr Gardner added: "This is a challenge that has been made worse by the record increase in rents in recent years, which, together with the cost-of-living crisis more generally, has hampered the ability of many in the private rented sector to save."

He said it was unsurprising that a significant proportion of first-time buyers now have to draw on help from friends and family to raise a deposit.

He said: "In 2023/24, around 40% of first-time buyers had some assistance raising a deposit, either in the form of a gift or loan from family or friends, or through an inheritance."

Further findings today revealed:

● Relatively little change is evident in overall levels of home ownership in recent years. The latest English Housing Survey produced by the Ministry of Housing, Communities & Local Government (MHCLG) showed homeownership rate remained stable in 2024 at 65%.

● There was a "slight increase" in the number of people owning their home with a mortgage, although the majority of homeowners (around 55%) own outright, which is largely a reflection of demographic trends.

● The proportion of households in the private rented sector remains stable, at 19%.

● Looking at trends over the long term, home ownership rates among younger age groups, in particular those aged 25-34 and 35-44, remain well below their 2004 peaks. However, the lender said that home ownership amongst those aged 25-34 has been gradually improving over the last decade and now stands at 45%, compared to 36% in 2014 (though still below 2004 peak of 59%).

● The number of households in England owning their homes outright has increased by 1.3m over the past ten years to reach 8.7m. This reflects demographic developments, says the Nationwide, in particular a rise in the number of older households (aged 65+), where the number owning outright has increased from 4.5m to 5.4m over the last decade.

Elsewhere, a consensus of predictions are pointing towards a 1-2% average rise for Gloucestershire properties this year. The increase would raise the average home price from around £370,000 to £380,000.

But advice from the HomeOwners Alliance suggests any predictions can be taken with a hefty pinch of salt: "it's worth noting that no one has a crystal ball and the experts often get it wrong," the Alliance said. "For example, Halifax's house price forecast for 2024 was that prices could fall between -2% and -4%... Land Registry figures from October 2024 show they in fact were up 3.4% year on year."

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