The key question facing buyers, sellers, and financial markets this year it seems, is will the Budget work?
New analysis by Knight Frank shows that while the General Election and Budget rumours hung over the property market in 2024, buyers and sellers will be dealing with the consequences in 2025.
Data shows average prices in prime central London fell 1% in the year to December 2024, while there was an increase of 1.2% in prime outer London.
The number of transactions in London last year was 0.5% higher than in 2023. Activity was skewed towards the second half of the year due to falling rates over the summer and a relief bounce in October when it became clear that capital gains tax for residential property would be left unchanged in the Budget. In the final six months of last year, transactions rose 3% compared with the same period in 2023.
Tom Bill, head of UK residential research for Knight Frank, said: “In a reversal of what took place 12 months ago, borrowing costs climbed during the Christmas break and in early January.
This time last year, rates came down due to falling headline inflation. Any positivity had faded by February as underlying inflation proved to be more stubborn than expected. For the new government at the start of 2025, stubborn underlying inflation is just one of many problems.
Markets are still digesting October’s Budget, concerned about the Treasury’s narrow financial headroom and the inflationary impact of borrowing and spending more. It has raised the prospect of further tax rises to alleviate the financial pressure.
The Government’s position has been made worse by expectations the US Federal Reserve will cut rates less than expected in 2025 due to the robustness of the country’s economy and their own inflation and deficit concerns as Donald Trump’s inauguration approaches.
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