UK House Prices Fall in February as Stamp Duty Holiday Ends, Says Halifax

UK Property Market Outlook for 2025 What to Expect

As we move into 2025, the UK property market is set for a year of moderate growth. Several key factors, including declining mortgage rates, government reforms, and regional trends, will shape the landscape. Here is a detailed look at what homeowners, buyers, and investors can expect in the coming year.

House Price Growth

Analysts are predicting an increase in house prices throughout the UK in 2025. Rightmove expects national asking prices to rise by 4%, while Hamptons forecasts a 3% increase across Britain.

Savills, a leading estate agent, projects average house price growth of 4%, with notable regional variations. The North West, North East, Scotland, and Yorkshire and the Humber could see price increases of 5%, while the East of England and the South West may experience more modest growth of 2.5%.

The London property market is expected to outperform other regions for the first time since 2015. However, high-end properties in London may see a 4% drop in value due to additional stamp duty charges and changes in non-dom tax rules.

Mortgage Rates and Affordability

A major factor influencing the property market in 2025 will be the expected decline in mortgage rates. Average 2-year and 5-year fixed mortgage rates are predicted to stabilise around 4%, lower than the higher rates of previous years. Combined with wage growth, this decline is likely to boost buyer confidence, particularly for first-time buyers.

The Bank of England is expected to take a gradual approach to lowering the base rate, with economists predicting around one cut per quarter throughout 2025. This could help further reduce borrowing costs, supporting stronger levels of mortgage lending and improving household spending power.

Rental Market

The rental market is expected to remain strong in 2025. Rental demand is likely to stay high, with rents forecast to grow by around 3%. However, there are signs of rent reductions in certain areas, as the market seeks stability. A challenge in recent years has been that rental price increases have outpaced wage growth, placing pressure on tenants.

Government Policies

Government policies will significantly influence the property market in 2025. Upcoming changes to stamp duty, effective from 1 April 2025, could impact buyer behaviour. The tax-free threshold is set to decrease from £250,000 to £125,000 and from £425,000 to £300,000 for first-time buyers. This may lead to increased activity before the deadline, similar to the surge seen during the temporary NIL band introduction in 2020.

Policies aimed at expanding housing supply, including greenbelt development and higher local building targets, could positively affect the market. The Labour government’s commitment to prioritising housing is also expected to support market stability and growth.

Regional Variations

Regional differences will continue to shape the UK property market. While London is predicted to lead in price growth, the northern regions remain attractive for investment. Cities like Manchester and Liverpool, benefiting from urban redevelopment and strong rental demand, present appealing opportunities for buyers and investors.

Mortgage Lending and Economic Outlook

Mortgage lending is set to rise significantly in 2025. Gross mortgage lending is projected to grow by 16% to £275 billion, up from £237.5 billion in 2024. This increase is partly due to improved affordability and greater demand for remortgaging as mortgage rates stabilise.

The UK’s gradual economic recovery is helping to strengthen consumer confidence, encouraging more borrowing from banks. However, potential risks include geopolitical tensions and the impact of upcoming UK tax rises, which could affect market confidence and lending growth.

Conclusion

In summary, the UK property market in 2025 is expected to experience steady growth, supported by lower mortgage rates, government policies, and strong regional trends. While challenges such as inflation and geopolitical uncertainty remain, the overall outlook is cautiously optimistic.

For clients of Cutts & Co Accountancy, staying informed and seeking expert advice will be key to navigating this changing landscape. With careful financial planning and tailored lending solutions, you can align your goals with the opportunities and challenges of the 2025 UK property market.

If you are considering buying, selling, or investing in property this year, staying updated on market trends and regulatory changes is essential. Contact our team at Cutts & Co Accountancy for personalised guidance and support to help you make the most of the UK property market in 2025.