Zoopla: The price difference between apartments and homes hits a 30-year high

Zoopla, a property portal, has discovered that the average house value is now 67% higher than the average value of an apartment

According to Zoopla, new sales agreed amounted to 10% more than a year ago, indicating that the housing market has had a robust start to 2025.

Higher mortgage rates and impending stamp duty hikes are to blame for the slight decline in annual house price growth, which decreased from 2% to 1.9%.

There are 11% more houses for sale than there were a year ago, according to the real estate portal, with apartments leading the way. The number of apartments for sale increased by 14% in the first few weeks of this year, while the number of homes for sale increased by a more moderate 5%.

Furthermore, according to Zoopla, the average house value (319,500) is 1 point 7 times, or 67%, higher than the average flat value (191,300), marking a 30-year high in the value gap between the two.

"The housing market is still strong, with more people looking to move in 2025 than at this time last year," says Richard Donnell, executive director at Zoopla. Buyer confidence is increasing and housing affordability is being reset thanks to average earnings increasing by 6% over the past year, which is significantly higher than inflation.

"When compared to homes, flats are now even more affordable. Homes continue to be preferred by buyers over apartments, but astute purchasers who are willing to do their research and consider buying an apartment instead of possibly waiting longer to buy a home may find opportunities.

Why is there now such a large price difference between houses and apartments?

Although apartments provide good value, buyers have remained more interested in purchasing homes than apartments, with 52% of first-time purchasers outside of London seeking a three-bedroom home (up from 44% in 2017), according to Zoopla. During the same time period, the demand for one- and two-bedroom apartments fell from 25% to 17%.

The pandemic's "race for space" increased demand for homes, but worries about the operating costs of apartments, like leasehold fees, and fire safety issues with some more recent apartments have affected demand and driven down apartment prices.

Over the last five years, the average value of an apartment has increased by only 7%, while the value of houses has increased by 24%.

There are many apartments for sale, but there aren't many buyers, which is the reason why the price difference between apartments and homes has reached a 30-year high. While home values have increased by 2 to 2 percent over the past year, apartment values have only increased by 0.5 percent.

"The higher percentage of apartments entering the market partly reflects the fact that the stamp duty hike from April will have a greater impact on lower-value markets," says Tom Bill, head of UK residential research at the estate firm Knight Frank.

Where is the greatest increase in home prices occurring?

In January, the majority of UK regions saw a halt or slowdown in the growth of home prices. Given that mortgage rates have risen by 0.5 percent since September 2024, which has reduced buyer power, this was a reflection of the precipitous decline in consumer confidence following last year's Autumn Budget, according to Zoopla.

A north-south divide in house price growth has persisted over the last 12 months. The North-West has a 3% increase in average prices, while Northern Ireland has a 7.2 percent increase.

The price of homes in London and southern England increased by just 1% to 1.2 %.

How do you think home prices will fare this year?

This year's house prices will probably be controlled by the mismatch between supply and demand as well as impending stamp duty adjustments.

The tax-free stamp duty thresholds, which were previously 250,000 for regular buyers and 300,000 for first-time buyers (from 425,000), will return to their initial values on April 1.

As the thresholds drop, half of homeowners will have to pay an additional £2,500 in stamp duty for each purchase, according to Zoopla. Sixty percent will still pay no stamp duty, but two-fifths of first-time purchasers will pay more starting in April.

"Homebuyers usually want to split the cost with the seller, so they will expect to reflect this additional expense in their offers. The total effect will limit the growth of home prices through 2025, according to Zoopla, even though the amounts are not substantial.

Bill from Knight Frank goes on to say that "the UK housing market is experiencing downward pressure on prices as demand is catching up with supply."