Soaring UK property values nearing all-time highs
UK Property Market Shows Signs of Recovery in 2025
The UK property market is demonstrating resilience and a potential upward trend in 2025, following a period of slowed house price growth. Despite recent decreases in mortgage rates, robust economic concerns and uncertainty are keeping buyer activity subdued.
According to various forecasts, average UK house prices are expected to rise by around 1% in 2025, a significant revision down from earlier predictions of 4% growth. Savills and Rightmove, two prominent property market analysts, have both revised their forecasts, with Savills projecting a 24.5% increase in house prices by the end of 2029, up slightly from previous forecasts.
The prime property market, which includes homes priced £500,000 and above, is forecasted to increase by nearly 18% between 2024 and 2029, indicating stronger growth potential in the luxury sector compared to the overall market.
The decrease in mortgage rates has improved affordability, but this has not yet translated into strong buyer activity. Economists attribute this to broader economic concerns such as rising unemployment and uncertainty ahead of government budgets. The Office for Budget Responsibility projects mortgage interest rates to peak around 4.7% by 2028 as many households transition off cheaper fixed deals to higher standard variable rates.
Experts predict a flat market in 2025, with price stability rather than sharp increases or downturns. This is due to a balance of slightly improved mortgage affordability, subdued buyer confidence, and economic pressures including inflation and unemployment.
Marc von Grundherr, director of Benham and Reeves, stated that the latest figures indicate the market is making a full return to health, and much of the negativity of the last few years has now been reversed. Amanda Bryden, head of mortgages at Halifax, added that mortgage affordability has been easing due to strong wage growth and falling interest rates.
The property market has shown a consistent month-on-month rise, signaling a potential upward trend for the remainder of the year. The UK's largest mortgage lender, Halifax, reported a 4.7% increase in house prices, the fastest pace since November 2022. The market has picked up with opportunistic acquisitions of prime properties in prime locations.
Tom Brown, managing director at Real Estate at Ingenious, believes the UK property sector's resilience and appeal persist despite higher inflation and sticky borrowing rates. Verona Frankish, CEO of Yopa, states that the property market has bounced back following a period of prolonged uncertainty caused by higher interest rates, and buyers are returning with confidence following the base rate cut in August.
Despite the current market conditions, there is a cautious optimism for the medium term. Savills projects the UK house price growth could reach around 24.5% by the end of 2029. However, economic uncertainties continue to weigh on buyer activity and price momentum across most UK regions.
[1] Savills UK Housing Market Forecast 2023-2029 [2] Rightmove UK Housing Market Forecast 2023-2029 [3] Office for Budget Responsibility Economic and Fiscal Outlook, March 2023 [4] Bank of England Interest Rate Decision, August 2022
Investors might find opportunities in the recovering UK housing market in 2025, given the forecasted 1% rise in average house prices. Despite improved mortgage affordability, robust economic concerns are keeping buyer activity subdued, as indicated by Savills' and Rightmove's revised housing-market forecasts.
