Posted on: January 1, 2025
What can we expect in the U.K property market in 2025?
PROPERTY MARKET 2025
It’s fair to say the last three years have not been good for households and the property market. But we have seen the green shoots of recovery in the second half of the year, with increases in both mortgage and estate agency activity.
Looking at predictions for 2025, this trend looks to be continuing albeit at a modest rate.
Saville’s estate agents predicted a modest but very welcome 3.5% increase in 2025, and an overall 21.6% increase in house prices by 2028.
The report by Saville’s also predicted an increase of 90,000 property transactions from 1.05 million to 1.14 million and levelling ant 1.16 million in 2027 and 2028. This is predicted on the back of increased confidence returning to the market as the cost of borrowing drops.
Many experts, including Saville’s predicted a contraction in prices in 2024 of 3%, but in fact the Office for National Statistics reported a 2.9% increase in the 12 months to September 2024. This was mainly down to reducing rates and high wage rate growth.
INTEREST RATES
Interest rates are predicted to drop in 2025 and beyond, as I write the Bank of England base rate sits at 4.75%. There have been 2 cuts of 0.25% in 2024, but the Monetary Policy Committee (MPC) have guarded against further cuts in 2024 as the wrestle with inflation which currently sits at 2.3% (0.3% above the 2% benchmark). The report from Saville’s predicted a gradual cut in interest rates by 1% in 2025 reducing gradually to 2% by 2027. Of course these are only predictions, some of which have already been revised. The borrowing market is currently divided into 2 camps, the first is borrowers who have already seen the interest rate rises and are looking forward to reducing rates as their fixed rates come to an end. And the second group where borrowers are still on lower fixed rates and will be exposed to payment shocks as these rates cease. Either way both groups are looking forward to rates reducing.
What remains to be seen is how much wriggle room the MPC have in terms of bringing rates down.
NEW HOMES
The new Labour Government have set a target of building 1.5 million homes in the next 5 year. Whilst welcome news the target only maintains what needs to be built without addressing the shortfall of previous years. It is hoped that house building will increase but there is significant commentary from many local authorities that 300,000 new properties per year is unrealistic due to the lack of appropriate sites. These comments are not unexpected from organisations that don’t have a great reputation for being positive about development. But we do expect an increase in the build numbers, but where this number lands for the next 5 years are up in the air.
OTHER FACTORS
Of course there are many political challenges also. The war in Ukraine, the paper-thin ceasefire in the Israel-Gaza war, the new regime in the United States as well as many problems elsewhere. We can only hope these conflicts resolve themselves peacefully.
SUMMARY
In summary it looks like interest rates will almost certainly drop in 2025 and prices will rise. But it is brave person that can give you a precise prediction.
YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOAN SECURED ON IT
The information contained within was correct at the time of publication but is subject to change.
The UK Property Market in 2025: Predictions & Trends – Hunter Finance
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