Wage Growth and the UK Property Market: A Promising Outlook for 2025
As we move into 2025, the UK property market is showing signs of steady growth. A major factor behind this trend is that wage growth is now outpacing the rise in property prices. This development, along with falling mortgage rates and new government policies, brings a sense of cautious optimism for both buyers and investors.
Wage Growth: A Key Driver
Recent figures from the Office for National Statistics show that average weekly earnings in Great Britain have seen a strong increase. From November 2024 to January 2025, annual average regular earnings grew by 5.9 percent, while total earnings grew by 5.8 percent.
This rise in wages is important because it boosts affordability for potential homebuyers. The Office for Budget Responsibility reported that household disposable income rose by 15 percent between the second quarter of 2022 and the same period in 2024. In contrast, property values only increased by 1.5 percent during that time. This narrowing gap between income and property prices is a positive sign for the housing market.
Easing Mortgage Rates
Another important development is the decline in mortgage rates. Over the last year, the average rate has decreased by 1 percent, bringing it to around 4.1 percent. This fall is expected to continue, with rates likely to stay around 4.25 percent for a 75 percent loan to value five year fixed rate mortgage.
Lower mortgage rates make borrowing more affordable. This is especially helpful for first time buyers and those looking to remortgage.
Government Policies and Their Impact
Government policy is also expected to influence the property market in 2025. Changes to stamp duty, which come into effect on 1 April 2025, are likely to encourage buyers to act quickly. There may be a surge in activity as people try to complete their purchases before the new rates are introduced. This situation could be similar to the rush seen in 2020 during the temporary NIL rate band period.
In addition, the government has plans to increase the housing supply. Measures such as allowing development on parts of the greenbelt and raising local building targets could help boost the market further.
Regional Variations and Investment Hotspots
While London is expected to lead in property price growth for the first time since 2015, other parts of the UK are also performing well. Cities like Manchester and Liverpool are becoming strong investment locations. These urban centres are benefiting from regeneration efforts and growing rental markets, making them attractive options for buyers and investors alike.
Rental Market Stability
The rental sector is likely to remain stable in 2025, with rental prices expected to rise by roughly 3 percent. Some areas may even see rent reductions as the market adjusts and seeks balance. Although rents have outpaced wage growth in previous years, demand for rental properties remains strong. This continuing demand underpins the resilience of the rental market.
Conclusion
The UK property market in 2025 is expected to experience moderate growth. Key factors such as faster wage growth compared to property price increases, lower mortgage rates, and favourable government policies all contribute to a more positive outlook.
For clients of Cutts and Co Accountancy, this may be an ideal time to explore property investment. Whether you are purchasing a home or adding to your investment portfolio, the current conditions offer promising opportunities.
As always, expert advice is important. At Cutts and Co Accountancy, our team is ready to provide tailored guidance to help you align your financial goals with the latest property market trends. If you are thinking about your next property move, we invite you to contact our experts for personalised support.
