Our Market Predictions for 2025

December 22, 2024

2024 was a great year for UK property. Robust growth returned to the market, house prices reached an all-time high and rents continued growing faster than wages.

Property has proved its resilience through economic challenges and we are entering a new property cycle.

Now, with 2025 approaching, we have looked ahead and made some predictions that provide insight for investors in the new year.

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House prices and rents to keep increasing in 2025

The housing market is growing at its fastest pace for two years, and this will continue in 2025. Not only that, but predictions from Savills show that property values will increase by an average of 23.4% by the end of 2029.

In areas like the North West (29.4%) and the West Midlands (26.4%), growth will be even higher – offering an even better opportunity for investors.

All of that means investing early in 2025 is the way to maximise your returns and make the most of every single penny of growth that is predicted in the next five years.

If you wait, UK buy-to-let property for sale will become more expensive, and the potential returns on offer may be reduced.

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Construction rates will remain low in 2025

The reason UK property is a better investment option than stocks and shares is that the supply problem is essentially impossible to solve.

It is estimated that there are four million homes missing from the UK market. We would need to almost triple our annual construction of new homes to meet demand within the next 10 years.

In reality, the number of new homes built each year is falling.

The 2024 English Housing Supply Update from Savills shows that completions in the last full year fell by 9%, and planning consents fell to the lowest level in a decade.

Worse still, in 2023 there was a 44% drop in new home registrations and a 16% fall in new starts on site.

That makes it very likely that construction figures in the years to come will remain low despite the government’s ambition to build 1.5 million homes by the end of 2029.

Even that insufficient goal has been criticised. Local Councils up and down the country recently wrote to the government describing the targets as “unfair and unrealistic,” claiming that they were “being set up to fail”.

If even the Councils instructed to build the homes don’t believe it can be done, investors can go ahead and assume that the homes will not be built.

The supply problem will get worse and the homes that already exist will become even more valuable in future, both to buy and to rent.

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Interest rates will keep falling, borrowing will become more affordable in 2025

A further factor that will impact demand is the increasing affordability of mortgage borrowing. The Bank of England cut the base rate of interest twice in the second half of 2024 and both times it gave the property market an immediate boost.

In 2025, we predict that the base rate will be cut several more times as indicated by the Bank of England’s governor, Andrew Bailey, who said the Bank could be a “bit more aggressive” at cutting borrowing costs, depending on the rate of inflation.

Inflation has fallen close to the national target, and official projections made in the government’s Budget show that it is likely to remain close to 2% for the next five years.

That means the Bank is very likely to make further cuts, and borrowing costs will fall as lenders react.

For investors, that means the cost of buying is going down at the same time as the return on investment is increasing – the perfect combination.

Furthermore, if you buy off-plan property you will pay the balance at a later date when mortgage rates could be even lower. Your property will benefit from growing house prices during construction, too, so you won’t miss out on any earnings.

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Legislation changes will benefit investors in the long term from 2025 onwards

The government will continue introducing new housing legislation in 2025 including the changes to Stamp Duty and the Renter’s Rights Bill. On the surface, these might look negative for investors, but we predict that they will end up being beneficial.

Firstly, the increased Stamp Duty costs will make investing slightly more expensive. However, it is also true that they are going up because the government knows that house prices are going to increase.

The growth of property values will be much more significant than the small additional Stamp Duty cost and in the long term, it is likely that investors will barely notice. It certainly should not put anyone off investing – the rewards are so much higher than the costs.

Secondly, the Renter’s Rights Bill will bring in a range of measures including:

Ending ‘no fault’ evictions in most circumstances
Replacing fixed-term tenancies with periodic tenancies
Banning ‘rental bidding’
Limiting rent increases

All of those might sound negative for investors, but what they provide is a more stable rental sector. After the last two years of economic ups and downs in the property world, investors should welcome that and see it as an incentive.

One of the big advantages of property is that it’s a tangible asset which is less volatile. Returns are more predictable and reliable than many other asset classes. Adding another stabilising factor cannot be a bad thing. Renters need assurances that they will not lose their home, and if they have them they are more likely to stay – helping to eliminate void periods.

Finally, many of the changes in the new law are already standard practice in the Build to Rent sector, meaning that for many landlords buying purpose-built rental properties, nothing will change.

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Buy UK property in 2025

Overall, 2025 is looking like a fantastic year to buy UK property. By applying the same guidelines as always…

…you can secure an outstanding investment opportunity that has many years of growth ahead of it. Returns on investment are increasing and this is the perfect time to invest in UK property.

Want to learn more about the UK market and buy property in 2025? Get in touch with the team today for more information.