House prices are forecast to climb by an average of 4% in 2025, marking the largest predicted increase since 2021, according to property giant Rightmove.
Although the rise aligns with long-term trends, it falls short of the pandemic years when a surge in demand, coupled with limited supply, drove prices sky-high.
With the number of homes for sale at its highest in a decade, buyers will be spoiled for choice next year, potentially tempering price growth.
Rightmove predicts around 1.15 million property transactions in 2025, reflecting a busier market as more homes change hands.
LONDON’S BACK
London’s property market is showing signs of resurgence after years of lagging behind the rest of the UK. Since 2019, average asking prices in the capital have risen by just 12%, compared to 21% across Great Britain.
Factors such as Brexit and the pandemic contributed to the slowdown, but 2025 could be a turning point, with prices in London expected to grow in line with, or even outpace, national averages.
MAGNET FOR WORKERS
Tim Bannister, Rightmove’s property expert, says: “The capital remains a magnet for workers and international buyers, and the return of major companies to the office five days a week is likely to bolster demand.”
Mortgage rates are set to drop slightly in 2025, with average five-year fixed deals predicted to hover around 4.0%, down from the current 4.83%. This reduction is expected to boost buyer confidence and affordability.
However, experts caution that rates won’t return to pre-cost-of-living crisis levels anytime soon. Geopolitical tensions and inflation remain key factors in the uncertain outlook for borrowing costs.
Smith explains: “While two-year fixed rates have been the pricier option recently, the gap with five-year rates is narrowing, making shorter deals more attractive for some buyers.”
STAMP DUTY
A looming change to stamp duty rates from April 1 is already creating a rush among first-time buyers and movers looking to save thousands in taxes.
Although this will likely lead to a busy first quarter, homes priced under £300,000 will still offer significant advantages for first-time buyers, especially compared to second-home buyers.
Toby Leek, President of NAEA Propertymark, says: “The upcoming changes could add around £2,500 to the cost of moving for many buyers, driving a surge in activity early in the year.”
REMORTGAGING SPOTLIGHT
With many fixed-rate mortgage deals from the pandemic era coming to an end, remortgaging is set to be a key focus for lenders in 2025.
Borrowers who locked in low rates during 2020 could face steep increases, while those coming off high post-mini-Budget rates may see some relief.
To help consumers navigate this shifting landscape, Rightmove has launched a remortgage tracker to monitor trends and lender behavior.
2025 OUTLOOK
As the year draws to a close, experts paint a cautiously optimistic picture for 2025. With inflation easing and interest rates creeping down, the housing market appears poised for growth.
“Affordability is improving, and the market is in a much stronger position compared to a year ago,” adds Bannister. “2025 looks set to be a year of opportunity for buyers and sellers alike.”
