Property experts are predicting that the year 2025 might tip in favour of those looking to purchase homes, offering them greater negotiating power and likely an uptick in property sales. Nevertheless, there is a word of caution being sounded due to the stamp duty discount expiration in spring and an unpredictable financial climate possibly impacting the projection of interest rate declines.
Rightmove’s property guru, Tim Bannister, commented: “We’re anticipating a stronger 2025, with higher price growth and more transactions than in 2024.”
He added: “The year ahead is not without some caution. We think 2025 will continue to be a buyer’s market, which could provide buyers with more negotiating power, given the number of available properties per estate agent is at a decade-high for this time of year.”
READ NEXT: Jeremy Clarkson’s farm shop suddenly closes for two months
Get breaking news on BirminghamLive WhatsApp, click the link to join
“There’s less competition amongst buyers than during the pandemic markets, which could provide them with some breathing room to choose the right home at the right price.”
“However, if the right property does come along, we wouldn’t advise waiting too long, as agents tell us that attractive homes, well-priced and in popular areas are still being snapped up quickly. Additionally, falling mortgage rates, which we expect to drop to around 4% by the end of the year, should improve affordability and sentiment.”, reports the Mirror.
The property market could see a resurgence in London house prices by 2025, with the shift driven in part by some big companies insisting on a return to office work, according to industry insights. Additionally, those looking to remortgage in 2025 might experience mixed fortunes.
With approximately 1.8 million fixed-rate mortgages ending that year, UK Finance data suggests significant changes are on the horizon. Mr Bannister said: “On one hand, there will be people rolling off a five-year, fixed-rate agreed during the pandemic frenzy, and will likely be facing higher costs.”
“On the other, there will be those who fixed for two years at the post-mini-budget peak, who come to the end of that deal and find themselves with lower costs.”
He also pointed out that while “the outlook is positive for 2025 … there is some uncertainty about what happens when stamp duty rises from April 1, as well as ongoing geopolitical tensions and the trend of inflation.”
The forthcoming alterations are especially noteworthy given the imminent change in stamp duty levels for first-time buyers—from the current temporary “nil rate” band of £425,000, reverting to £300,000 starting April 1—in England and Northern Ireland.
Lucian Cook, head of residential research at Savills, remarked: “First-time buyer activity is expected to be front-loaded in 2025 as these buyers rush to beat the end (of) stamp duty concessions in March.”
He’s predicting a bounce back in the property game, kicked off by those needing to buy and then more moves when mortgage costs start to ease. He reckons we’ll see fewer cash buyers and said, “Opportunistic buyers that have benefited from the weaker market of the last two years will be squeezed out by increasing numbers of mortgaged owner-occupiers.”
Mr Cook mentioned, “The direction of mortgage rates has been key to buyer decisions over the past two years, and decreased monthly mortgage costs are now feeding through into improved confidence amongst prospective buyers, prompting the moderate house price growth we have seen over the past few months.”
He’s also got it on his radar that the homes market could feel a bit of aftershock in 2025 from what he calls “. The race for space was a trend observed during the coronavirus pandemic, when there was high demand for properties in more rural and coastal areas.Mr Cook also suggested that activity in the prime sector of the housing market might trail behind the wider market. He explained: ” – where everyone was after a bit of green during the pandemic, lifting the South West and East of England more than London.
Mr Cook hinted as well that the fancy-pants part of the housing market might lag behind the general market, adding, “In a normal housing market recovery, you would expect the top end of the market to recover first, responding quickest to a change in sentiment.”
“However, the additional stamp duty surcharge for second homes, changes in non-doms taxation and VAT on school fees are likely to offset some of the impacts of future cuts in interest rates this time around, meaning that prime market activity will lag behind the mainstream.”
The property markets in central London are feeling the brunt of these changes, but there’s a glimmer of hope for prime locations outside the capital. “The markets of prime, central London are most directly affected … but, the outlook is somewhat brighter in the prime markets outside of London,” Mr Cook explained.
He also pointed out that prime regional markets could experience a surge in interest as families seek the perfect blend of affordability, commuting options, and quality schools. “Prime, regional markets, in particular, are likely to benefit from some displaced demand as families look to strike a balance between house prices, commutability, and access to schooling.”
Mr Cook also forecasted that a scarcity of properties will continue to drive up rental prices.
He stated: “High demand and low supply have been the influence behind the significant rental growth seen over the past few years.”
He cautioned that this trend is set to persist, with rent increases expected to continue surpassing income rises.
“At a national level, this pattern looks set to continue with rents expected to rise above incomes again, especially as it is difficult to see where an increase in rental supply will come from in the next couple of years.”
Looking ahead, Mr Cook predicts a 4.0% increase in rents for 2025, which is likely to outstrip wage growth. “As a result, we have forecast that rents will rise a further 4.0% in 2025 – outpacing income growth.”
However, he pointed out that the sharp rise in rental costs has already stretched many renters’ budgets to their limits, suggesting that some areas might not be able to sustain further increases. “But, strong rental growth has stretched the finances of those living in the rental sector, limiting the capacity for further increases in some markets.”
“In particular, slower rental growth through 2023 has led to a slight easing of affordability pressures in London. We expect that this trend will continue in the near term with rental growth of 2.5% in London in 2025, against income growth of 2.9%.”
“However, we do expect to see more affordable markets in the North, where mortgaged buyers are under less strain, to see the strongest acceleration in growth beyond 2025.”
Richard Donnell, executive director at Zoopla, has highlighted the stark reality of the housing market, saying: “The unaffordability of home buying has been one factor behind a 27% increase in rents over the last three years, outpacing the growth in earnings over the same period.”
He mentioned the anticipation of further rent increases, explaining: “We expect rents for new lets to rise by 4% over 2025 and by 10% over the next three years – the impetus for growth will come from areas where renting is more affordable, like Rochdale, Burnley and Newcastle.”
“Rental inflation will be weaker in the most expensive markets where rents have risen the most in recent years, which covers London and the major cities.”
Zoopla has highlighted that adjustments to stamp duty will particularly affect the south of England, as this region tends to have more expensive properties. On a brighter note, UK Finance, the banking and finance sector organization, hints at a slight improvement in mortgage affordability by 2025, hoping to reinvigorate market activity.
They anticipate a minor drop in interest rates, which could lead to fewer mortgage arrears. UK Finance expects the peak in customers failing to keep up with their mortgages would have occurred early in 2024 before showing a downtrend.
Additionally, UK Finance forecasts an increase in lending to prospective homeowners, estimating it to hit £148 billion in 2025, a 10% rise compared to the preceding year. Despite this optimistic scenario for home purchase and remortgaging lending thanks to better affordability, they predict that buy-to-let (BTL) lending is set to decrease in 2025.
The sector is gearing up for the continued impact of costs and tax challenges, with UK Finance predicting a 7% drop in new buy-to-let (BTL) purchase lending for 2025 compared to the previous year, amounting to £9 billion. In contrast, Nationwide Building Society and Halifax are forecasting modest house price growths, with predictions ranging from 2% to 4% and 0% to 3% respectively for 2025.
Propertymark has emphasised the importance of availability, stating: “It remains paramount to ensure there is a sustainable mix of properties available and in targeted areas where there is greatest need.”
Estate agents such as Jackson-Stops foresee families seeking larger homes and retirees looking to downsize as key market drivers, but they also highlight that protracted transaction times, which can sometimes exceed three months, are a significant hurdle.