Figures from the Office for National Statistics (ONS) showed this was stronger annual growth than the 4.6% uptick recorded in the 12 months to December and the highest level since February 2023.
Richard Harrison, head of mortgages at Atom Bank, said this was a “great snapshot of the start of the year” as buyers aimed to complete before the stamp duty deadline.
He added: “Even if the passing of the stamp duty deadline leads to a material drop in demand, the underlying lack of supply means prices are unlikely to drop at all over the coming months.
“Cheaper mortgage rates are playing their part, too. Moneyfacts reported significant momentum in rate falls across February, with two- and five-year fixes dropping at the fastest pace in six months. With inflation coming in lower than expected, and the markets now predicting there will be two further base rate cuts this year – potentially from as soon as May – the prospect of mortgage rates heading below 4% will buoy buyers.”
On a monthly basis, house prices across the UK increased by a muted 0.2%.
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Average house prices also went up by 0.2% month-on-month in England to an average of £291,397, which was a 4.8% yearly increase.
In Scotland, values were up 0.2% compared to the previous month at £187,434, representing a 4.6% year-on-year increase.
House price inflation was strongest in Wales and Northern Ireland, with a 0.9% monthly rise in Wales to £209,579 and a 1.5% quarterly increase in Northern Ireland to £183,259.
On an annual basis, this showed rises of 6% and 9% respectively.
Beyond stamp duty
Tim Parkes, CEO of RAW Capital Partners, said the house price figures aligned with what the company was seeing on the ground.
He suggested this activity could continue, adding: “Momentum built towards the end of last year, and activity levels have surged in early 2025.
“Despite next week’s changes to stamp duty thresholds, there’s still optimism that the market will continue to perform well throughout the spring and summer months.”
London house prices no longer stagnant
Average house prices in London rose by 2.3% both monthly and annually to £563,899, bringing an end to a string of monthly declines and stagnation.
It was also the only area in England to see monthly growth higher than 1%, as the region with the second-highest monthly change was the South East, where house prices rose 0.5% to £386,103. Annually, average house prices in the South East were 4.5% higher.
The strongest annual growth was recorded in the North East with a 9.1% surge to £161,373, followed by the North West, where prices rose 6.8% year-on-year to £210,259, then the East Midlands, with a 6.2% change to £241,159.
Most regions in England showed a flat or monthly fall in average house prices and Yorkshire and the Humber had the largest drop with a 0.6% decline to £202,930.
Recalibration of the market
Jonathan Hopper, CEO of Garrington Property Finders, said: “House price inflation has moved from brisk to breathless in the most affordable parts of the country.
“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.”
He suggested this rise was probably due to people potentially paying more for homes so they could complete before the stamp duty threshold increases.
“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,” he added.
Hopper said: “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.”
Semi-detached home values surge
Semi-detached house prices rose by the most in January, up 6% on the previous year at £271,027. This was closely followed by terraced homes, which rose 5.9% to £225,308.
The average price of a detached home was 4.7% higher than January 2024 at £440,067 and flat or maisonette values increased 2.3% to £196,069.
New-build homes escalated by 22.1% in average value to £399,858 compared to last year. This was 9% more than the previous month.
Annually, the average price for a resold property was 2.6% higher at £261,645, and 0.6% down on the month before.
First-time buyers paid 5.3% more for their homes in January than they did the previous year, at a value of £227,026. This was 0.1% more than in December. Former owner-occupiers paid £330,717 for their homes on average, 4.4% more than the previous year and 0.4% up on the month before.
