What the experts are predicting for the property market in 2025

As a landlord, you always need to plan and budget ahead for your property investment.

So it’s helpful to know what economic and industry forecasters expect to happen to prices and rents in the next year – and beyond.

Before we look at the predictions for 2025, here’s a round-up of what happened last year:

Economy & market

• Overall, the property market performed better versus 2023’s forecasts
• There was positive average price and rent growth, although at a slower rate than in the previous few years
• Strong wage growth, low unemployment and more competitive mortgage rates helped fuel growth and consumer confidence

Sales

• Average UK house prices increased by 1.9% (Zoopla)
• The end of year sales pipeline was at its highest for 4 years
• The number of sales agreed in the four weeks to mid-December was 23% higher than in 2023

Lettings

• Demand continued to outstrip supply across most of the country, although the gap is reducing. In the 12 months to December 2024, Rightmove reported:

• The average number of enquiries per rental property had fallen from 19 to 11
• The number of people looking to move had dropped by 19%
• The number of homes available to rent was up by 7%

• We’re starting to see some pressure on affordability – since 2019, average rents have risen by 40%, while wages have only risen by 28% (Rightmove)
• Annual rent growth for new lets in the year to October 2024 was 3.9% - ranging from 1.3% in London to 10.5% in Northern Ireland (Zoopla)

The economy in 2025: inflation and the base rate

Inflation and the Bank of England base interest rate are key to the future of the property market, as both have an effect on mortgage rates, affordability and consumer confidence.  

Since Labour’s Autumn Budget, and with inflation still above the 2% government target, forecasters have revised their earlier predictions for 2025.

While a reduction in the rates is likely to take longer than previously expected, the good news is there isn’t any panic in the market and the short and medium-term outlooks are still positive.

KPMG

Forecast in September 2024:

• Inflation will rise to 3% in early 2025, but end the year around 2%

• Base rate will drop to 3.5% by December

In January 2025:

• Inflation will be between 2% and 3% through 2025 and 2026, dropping to 2% in 2027

• Base rate is unlikely to drop below 4% this year but should reach 3.5% in 2026

Capital Economics forecast

• Last year forecast the base rate would reach 3% by the end of 2025
• Now believe it will be cut to 3.75% this year and 3.5% in early 2026

Oxford Economics forecast

• Base rate will drop to 3.75% this year, with four cuts of 0.25% beginning in February

Meanwhile, the Office for Budget Responsibility (OBR) predicted inflation would be at 2.6% in 2025-6. Importantly, both wages/salaries and average earnings are predicted to grow at above the rate of inflation, at +3.8% and +3% respectively, which is good news for homebuying and renting affordability,

The sales market: what’s expected this year?

CBRE & JLL forecasts

• Average UK house prices will grow by 3.5% this year
• Over the next 4 years, growth will fluctuate between 3.5% and 4.5%
• Sales transactions will hit their long-term average of 1.2m
• Northern Ireland, the North-West, West Midlands and Yorkshire & Humber are likely to perform particularly well

As long as inflation moves as expected towards its 2% target over the next 3 years, this is good news for the market, as stability and steady upward growth feed consumer confidence.

Stamp duty changes for England and Northern Ireland

SDLT thresholds at the lower end of the market are returning to the levels they were at prior to 23^rd September 2022.

From 1^st April 2025:

• The nil-rate threshold will drop back from £250,000 to £125,000, and a rate of 2% will be applied to the portion from £125,001 to £250,000.
• The nil-rate for first-time buyers will drop back from £425,000 to £300,000, and the maximum purchase price to qualify for this will also reduce from the current £625,000 to £500,000.

Because of this, we expect that many buyers, particularly First Time Buyers (FTB), will be keen to complete on a purchase in the first quarter of the year.

The rental market: forecasts for 2025

Although demand is still strong enough in much of the UK for landlords to be able to let quickly and achieve good profits, it’s generally expected that 2025 will be a much calmer rental market.

With the Renters’ Rights Bill likely to pass, possibly before the spring, some landlords might decide to sell up and exit the market.

In that case, we could see a temporary shortage of rental properties on the market push prices up again.

However, we do expect a lot of rental sales to be made to other landlords – potentially with sitting tenants.

Average rent growth forecasts:

• CBRE: 2.3%
• JLL: 3%
• Rightmove: 3%
• Zoopla: 4%.

Next steps for landlords

2025 should be another solid year for landlords across the UK, especially in areas where rents are at a more affordable level.

As always, one of the key things for your rental business is to keep track of inflation and make sure you increase rents every year, where you can, by at least that percentage to maintain the real-term value of your profits.

Assuming the base continues to come down steadily, mortgage rates should follow suit through the year.

So, if you haven’t already done so recently, it’s well worth reviewing the capital value and financing of your property or portfolio in the coming months.

 

To find out how your local market is expected to perform this year and beyond, or if you’d like any help ‘spring cleaning’ your property investment business, just get in touch with us.

You can find your local branch here or alternatively book a lettings consultation.

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