The UK property market faces another period of adjustment following years of economic turbulence.
With stabilising house prices, fluctuating mortgage costs, and easing inflation, the next year’s outlook offers both challenges and opportunities. Here’s a closer look at current trends and predictions for 2025.
House Prices: Holding Steady
UK house prices have demonstrated remarkable resilience through late 2024. The average property price reached £293,999 in October, reflecting annual growth of around 3.8%. This moderate rise highlights the market’s stabilisation after a turbulent period marked by steep borrowing costs.
For 2025, growth is expected to remain subdued but steady. Regional disparities are likely to persist, with more affordable areas like the North and Midlands continuing to attract demand. In contrast, pricier regions, such as London and the South East, may see slower growth as affordability constraints limit activity.
Inflation and Renting: A Dual Challenge
Inflation, which reached double digits in 2022, has eased significantly. As of December 2024, it stands at 2.3%, thanks to falling energy and transport costs. However, food prices remain a notable pressure on household budgets.
In the rental market, conditions are far more challenging. Average rents have climbed by 8.7% year-on-year, with London seeing even sharper increases at 10%. This rental escalation reflects strong demand and limited supply, forcing many renters to reassess their housing plans.
Borrowing Costs: The Long Road to Affordability
While mortgage rates have eased since their peak earlier in 2024, borrowing remains expensive compared to pre-2022 levels. Two-year fixed rates now hover around 5.5%, down from over 6% earlier in the year. The Bank of England’s recent base rate cuts have helped, but rates are still far above the sub-2% levels seen during the pandemic.
First-time buyers and those seeking to remortgage will likely face continued affordability challenges. Longer mortgage terms and shared ownership schemes may grow in popularity as buyers adapt to higher borrowing costs.
For bridging finance borrowers, particularly landlords and property investors, these dynamics could signal opportunities. Rising rental yields may make buy-to-let investments more attractive, even as high borrowing costs temper the market. Bridging loans could provide a critical tool for landlords looking to refurbish properties quickly or expand portfolios in areas where rental growth outpaces costs.
What Could 2025 Hold?
The year ahead of us is expected to bring modest changes across the housing market:
Stability in house prices will be the key theme, with minor growth likely in affordable regions.
Continued pressure on affordability could push buyers toward more creative financing solutions.
High rental inflation will sustain demand for affordable housing but could also spur government intervention to address supply issues.
Buy-to-let investment may slow, but strong rental yields could still attract experienced landlords.
Uncertainties on the Horizon
While the outlook for 2025 suggests stabilisation, unexpected economic shocks, policy shifts, or global events could disrupt these trends. For now, the UK property market appears to be entering a phase of recalibration.
Whether you’re a buyer, seller, or investor, the year ahead won’t be without challenges. But it may bring the chance to find value in a market that’s steadily finding its footing again.
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