UK Housing Market Predictions 2024 & 2025

The UK housing market has experienced significant changes in recent years, and as we look to 2024 and ahead to 2025, several key trends are expected to shape the landscape.

Economic conditions, government policies and shifting buyer preferences will all play pivotal roles in determining the market’s direction. 

The pace of price growth is expected to moderate compared to previous years. The focus will likely shift towards stability and gradual appreciation rather than the rapid increases seen in the past.

The rental market is also set for significant developments. Increased regulation and changing tenant expectations will impact rental yields and investment strategies. Understanding these dynamics will be crucial for investors looking to navigate the market effectively.

We examine UK housing market predictions for 2024 – 2025 to see what investors can expect. 

2024: Continuing Transition for the Housing Market

After record-breaking property prices in 2021 and a bumpy 2022, 2024 is expected to continue the transition as buyers and sellers adapt to a new era of higher interest rates. The UK base rate, which had risen to 4% by 2023, might see further adjustments to combat inflation.

• Economic Influences: High inflation and a rising cost of living are likely to persist, contributing to a continued slowdown in the housing market.
• Interest Rates: Mortgage costs are anticipated to remain high, affecting buyer affordability and transactional activity.

2024 House Prices: Modest Recovery Expected

While house prices soared by more than a quarter during the pandemic due to low interest rates and tax incentives, the economic environment in 2024 is expected to keep property prices sluggish. 

Predictions suggest that house prices will see a modest recovery towards the end of 2024, with a more noticeable pick-up in early 2025 as inflation and interest rates start to decline​​.

• Price Predictions: House prices are expected to fall by around 5% in early 2024 before stabilising and potentially increasing towards the end of the year.
• Regional Variations: Greater London might see a smaller price drop of 2-3%, while areas like Yorkshire and the Humber could experience declines of around 7%.

Regional UK Property Market Trends 

Different regions will experience varying trends in 2024. Cities like Manchester, Birmingham, Bristol and Edinburgh are expected to fare better with smaller house price drops compared to other regions.

• Greater London: Predicted to see a 2-3% decrease in house prices.
• Northern Cities: Areas like Manchester and Birmingham might only see modest declines or even stability in house prices.

 Overseas Buyers

In 2022-2023, we saw cost of living pressures begin to ripple through the market. With a weaker pound, wealthy overseas buyers were taking the opportunity to secure homes in central London. The number of reservations from international buyers was up 33% in 2022 compared with the previous year. Most of these overseas buyers are from Mainland China, Hong Kong and Malaysia.

In 2024 and 2025, the trend of overseas buyers snapping up properties, particularly in London, is expected to change. With the pound stabilising, the influx of international buyers may reduce. Instead, domestic buyers could play a more significant role in the market dynamics.

• Overseas Buyers: Interest from Mainland China, Hong Kong, and Malaysia might decrease.
• Domestic Buyers: An increase in domestic buyer activity could help stabilise certain market segments.

The 2024 and 2025 Rental Market

The rental market in 2024 is projected to remain robust due to ongoing supply-demand imbalances. This trend is expected to continue into 2025, reflecting the persistent pressure on rental properties. 

The significant increases in rental prices seen in 2022, which held steady through 2023, are set to continue their upward trajectory.

Past Trends and Increases:

• In 2022, UK rents surged due to economic uncertainty and rising property prices, pushing many potential buyers into the rental market. Between January and November 2022, rents climbed by 10% from £1064 to £1175 on average.
• By early 2023, the average rent had plateaued at the November 2022 peak. The imbalance between supply and demand continued to drive rental prices up, with a 4% increase predicted for 2023.
• Specific cities like Manchester saw rents increase by 6%, Birmingham and Bristol by 5% and 4%, respectively, with Leeds and Liverpool experiencing a 2.5% rise.

House Price Prediction 2024:

• The ongoing imbalance in supply and demand is expected to keep upward pressure on rental prices. UK rents are projected to rise by 3-4%, with Manchester potentially seeing a 5% increase.
  
• Birmingham and Bristol are forecasted to experience rental growth of 4% each, while London could see a 4-5% increase, particularly in central areas where demand remains high.

Outlook for 2025:

• The trends of 2024 are likely to persist into 2025, with rental growth continuing as demand remains robust and supply limited.
  
• Energy-efficient homes and properties near public transport will remain highly sought after, driven by ongoing cost-of-living pressures and the return to city-centre living.

Key Trends for the 2024 and 2025 Rental Market

• Sustained Rental Growth:

Rental prices across the UK are expected to continue rising by 3-4% annually, reflecting ongoing demand and limited supply. Manchester, Birmingham, and Bristol are likely to see significant increases, with Manchester potentially leading at 5%.

• London’s Rental Market:

Central London is expected to experience a 4-5% increase in rental prices, driven by high demand and limited availability.

Outer London areas may also see notable growth, although slightly lower than central areas.

• Energy Efficiency and Location Preferences:

Tenants will increasingly seek energy-efficient homes to mitigate rising energy costs. Properties near public transport will remain in high demand due to convenience and cost-saving benefits for commuters.

• Supply Constraints:

The ongoing shortage of rental properties is expected to continue, exacerbating the demand-supply imbalance. With fewer new builds and the end of schemes like Help-to-Buy, many would-be buyers will remain in the rental market, further straining supply.

• Affordability Challenges:

The proportion of income spent on rent is expected to remain high, with renters in London potentially spending over 35% of their income on housing. Affordability will continue to be a major issue, possibly leading to increased demand for shared living spaces and co-living arrangements.

Overall, the rental market in 2024 and 2025 is set to continue its growth trajectory, driven by persistent demand, supply constraints and evolving tenant preferences. Investors and landlords might find opportunities in this market, particularly in high-demand areas and energy-efficient properties.

Demand for Energy Efficient Homes in 2024 and 2025

With the rising cost of living, renters continue to be drawn to energy-efficient, new-build city centre rental homes to keep energy costs low. This trend is expected to persist and even strengthen in 2024 and 2025, driven by economic pressures, legislative initiatives and changing renter preferences. 

The return of students to city centres and a general shift towards sustainability are also influencing the market. Additionally, legislative measures are encouraging landlords to invest in energy efficiency, further shaping the rental landscape.

Legislative Initiatives:

The UK government has introduced stricter energy efficiency standards for rental properties, with requirements for properties to achieve a minimum EPC (Energy Performance Certificate) rating of C by 2025​.

Landlords are being incentivised to upgrade their properties with grants and tax breaks aimed at improving energy efficiency, reducing the environmental impact and enhancing tenant comfort.

Landlord Expectations:

• Landlords can expect increased demand for properties that meet higher energy efficiency standards. Investments in insulation, double glazing and energy-efficient heating systems are becoming necessary​.
• As a result of these upgrades, landlords may experience higher upfront costs, but the long-term benefits include higher rental yields and reduced vacancy rates due to the attractiveness of these properties to tenants.

Renter Preferences:

Renters are prioritising properties with lower energy bills, especially amid rising utility costs. Features such as energy-efficient appliances, LED lighting and solar panels are increasingly sought after​​.

There is also a notable shift towards properties with smart home technologies that allow for better energy management and cost savings, appealing particularly to tech-savvy younger renters.

Construction and Development Trends:

New developments are increasingly focused on sustainability, with many new-builds incorporating green roofs, rainwater harvesting systems and sustainable building materials​​.

Urban planning is emphasising mixed-use developments that combine residential units with commercial spaces, reducing the need for long commutes and fostering sustainable living environments.

Geographical Focus:

Energy-efficient homes are primarily being built in city centres and well-connected suburban areas. Proximity to public transport remains a key factor, with developments near transit hubs attracting significant interest​​.

Additionally, there is growing interest in suburban areas that offer a balance of urban amenities and natural green spaces, appealing to families and remote workers seeking sustainable living options.

The combination of legislative pressures, evolving renter preferences, and advancements in sustainable construction is reshaping the UK rental market. Energy efficiency is no longer just a bonus but a critical factor influencing rental decisions, driving both landlords and developers to adapt to this new reality.

An Imbalance in Supply and Demand Continues to Underpin Rents in 2024 and 2025

The lack of homes to rent remains a significant issue across the UK, exacerbating the imbalance between supply and demand. This situation, compounded by the end of the Help-to-Buy scheme, has left many prospective buyers in the rental market, further constraining supply. 

Economic pressures, rising living costs and high borrowing rates suggest that demand for rental properties will remain robust. As a result, affordability continues to be a major concern for tenants, while landlords may see rising yields despite higher debt costs.

• Efforts to Build New Homes

The UK government has initiated several measures to increase housing supply, including incentivising new builds and converting commercial properties to residential use​​.

However, these efforts have not yet significantly alleviated the supply shortage, as construction has been slow to meet the high demand.

• Lack of Supply:

The ongoing supply deficit is driven by several factors, including planning permission delays, rising construction costs and a shortage of skilled labour​.

This shortage has significantly impacted both the buyer/seller and rental markets, driving up prices and making it difficult for many to find affordable housing.

• Impact on Buyer/Seller Market:

High property prices and limited availability have pushed many potential buyers into the rental market, increasing rental demand and putting further pressure on rents.

With fewer households able to afford home purchases, the sales market remains sluggish, impacting overall market dynamics.

• Rental Market Dynamics:

The high demand for rental properties has led to significant rental growth, with tenants spending a large portion of their income on rent.

For landlords, this translates to higher rental yields, but the rising cost of debt remains a challenge, requiring careful financial management and strategic property investments​.

The imbalance in supply and demand continues to underpin the UK rental market, with efforts to build new homes still falling short of meeting the high demand. Economic pressures and high borrowing costs are likely to keep rental demand strong, making affordability a persistent issue for tenants. As the market adapts to these challenges, landlords may find opportunities in rising rents, but must navigate the complexities of higher debt costs.

Housing Market Prediction UK: 2025

Preference for Energy-Efficient and Sustainable Homes

Housing market predictions UK shows that homebuyers are increasingly seeking properties that offer sustainability and energy efficiency.

• Eco-Friendly Features – Buyers are prioritising homes with energy-efficient windows, insulation, and renewable energy sources like solar panels. These features not only reduce environmental impact but also help in lowering utility bills​.
• Government Incentives – Various government incentives for energy-efficient home improvements are making these properties more attractive. Buyers are more willing to invest in homes that already comply with or exceed future regulatory standards.

Urban to Suburban Shift and Back Again

The pandemic accelerated the trend of moving from urban centres to suburban or even rural areas:

• Work-from-Home Flexibility

As remote work becomes a permanent option for many, buyers are looking for homes with more space, including home offices and gardens, often found in suburban and rural areas.

• Quality of Life

Suburban areas offer a better quality of life with less congestion, more green spaces and lower living costs, making them attractive to families and retirees​.

Urban to Suburban Shift: Reconsidered for 2025

While the initial trend during the pandemic was to move towards suburban and rural areas, the evolving work environment and the reopening of city amenities have prompted many to move back to urban centres. 

There is a trend of many buyers seeking a balance, leveraging the flexibility of remote work while enjoying the conveniences and opportunities of city life.

The dynamics of the property market have evolved as people reassess their housing needs.

• Work-from-Home Flexibility

During the pandemic, remote work flexibility drove many buyers to seek homes with more space, including home offices and gardens, which are often found in suburban and rural areas​.

However, as hybrid work models become more common, the need to commute occasionally has drawn people back to urban centres where they can balance remote work with easy access to office locations.

• Quality of Life

Cities are regaining popularity due to their vibrant cultural scenes, social amenities and conveniences like public transportation, which many missed during lockdowns.​

Updated Trends in the Buying Market for 2025

Renewed Urban Living Appeal

• Return to Offices and Urban Amenities: The return to offices, even part-time, and the reopening of urban amenities like restaurants, theaters and social venues have made city living attractive again. This trend has been particularly strong in cities like London, Manchester, and Liverpool.
• Cultural and Social Attractions: Urban areas are seeing increased demand as people seek the cultural, social and professional opportunities that cities offer. This includes a resurgence in demand for city-centre flats​.

 Increasing Demand for Affordable Housing

Affordability remains a critical concern, driving demand for more affordable housing solutions:

• First-Time Buyers: First-time buyers are seeking affordable entry points into the housing market. This includes smaller homes and properties in less expensive areas.

Expected Trends in the UK Seller Market for 2025

• Rising Popularity of Home Upgrades – Sellers are investing in home upgrades to make their properties more attractive to buyers:

• • Renovations and Improvements: Sellers are focusing on key renovations, such as modern kitchens and bathrooms, to increase the market value of their homes. Energy-efficient upgrades are particularly popular​.
  • Staging and Presentation: Professional home staging and high-quality photography are becoming standard practices to attract potential buyers and achieve higher sale prices.

• Strategic Timing of Sales – The timing of property sales is becoming more strategic, influenced by market conditions and seasonal trends:
  • Market Conditions: Sellers are more likely to list their homes when market conditions are favourable, such as during periods of low interest rates or high demand​​.
  • Seasonal Trends: Spring and early summer remain popular times for selling homes, as properties tend to look their best and buyer activity is highest during these periods​.

• Adaptation to Technology

Technology is playing an increasing role in the selling process:

• Virtual Tours and Online Listings: The use of virtual tours and comprehensive online listings has become essential, allowing buyers to explore properties remotely and reducing the need for in-person viewings​.
• Data-Driven Pricing: Sellers are utilising data analytics to set competitive prices based on market trends and comparable property sales, helping to attract more serious buyers and close deals faster​.

Expected Trends in the UK Rental Market for 2025

Renters are increasingly prioritising lifestyle factors when choosing rental properties. This trend includes a growing demand for amenities that enhance quality of life, such as:

• Green Spaces and Wellness Facilities: Properties that offer access to parks, gardens, and wellness amenities like gyms, pools and yoga studios are becoming more popular. The importance of health and well-being, amplified by the COVID-19 pandemic, continues to drive this demand.
• Co-living and Shared Spaces: Co-living spaces that provide communal areas for socialising and working are attracting younger renters and professionals. These properties often include shared kitchens and lounges, catering to the desire for community and convenience​.
• Emerging Cities on the Rental Radar

While major cities like London and Manchester remain key markets, several smaller cities are emerging as attractive rental destinations:

Bristol and Birmingham: These cities are gaining popularity due to their robust job markets, vibrant cultural scenes and relatively affordable housing compared to London. Investment in infrastructure and urban development projects are further enhancing their appeal.

Northern Cities: Cities such as Newcastle, Liverpool and Leeds are also on the radar due to their lower living costs and strong local economies. These cities offer a balance of affordability and quality of life, making them attractive to a diverse range of renters.

Why Types of Property Will Be in Demand in 2024 and 2025?

In 2024 and 2025, the housing market will see a diverse range of preferences among home buyers, landlords and renters, all driven by the desire for energy efficiency, affordability and convenience. 

For Home Buyers

• Energy-Efficient and Sustainable Homes

Homes with energy-efficient windows, insulation and renewable energy sources like solar panels are highly sought after. Buyers are increasingly prioritising properties that offer lower utility costs and environmental benefits.

New developments that focus on sustainability and eco-friendly designs are particularly attractive. These homes often include smart home technologies for better energy management​.

• Suburban and Semi-Rural Properties

Space and Comfort: The demand for homes with more space, such as larger gardens and extra rooms for home offices, remains strong among families and those seeking a higher quality of life. Suburban areas offer these features while still being relatively close to urban centres​.

Mixed-Use Developments: Properties within mixed-use developments that combine residential, commercial and recreational spaces provide convenience and a community feel, making them appealing to a wide range of buyers.

For Landlords

• Energy-Efficient Rental Properties

Similar to home buyers, renters are also looking for energy-efficient properties that can help reduce their living costs. Landlords investing in energy-efficient upgrades are likely to see higher demand for their properties.

Compliance and Incentives: With increasing regulatory requirements for energy efficiency, landlords are expected to upgrade their properties to meet these standards, benefiting from government incentives in the process.

• Urban Apartments and Flats

Properties in urban areas, especially those close to public transport and amenities, are expected to remain popular. The convenience and lifestyle benefits of city living attract young professionals and students.

Apartments that offer modern amenities such as high-speed internet, smart home features and communal spaces (gyms, lounges) are particularly attractive to urban renters​.

For Renters

• Affordable Housing Options

With ongoing economic pressures, there is a strong demand for affordable rental properties. Renters are looking for homes that offer good value for money without compromising on essential features.

Shared Living Spaces: Co-living spaces and shared apartments are becoming more popular among young professionals and students who are looking to save on rent while enjoying a community lifestyle.

• Proximity to Work and Amenities

Proximity to work, public transport and amenities continue to be a key factor for renters. Properties in city centres and well-connected suburban areas remain highly desirable​.

Energy Efficiency: Similar to home buyers, renters are increasingly seeking properties with energy-efficient features to help manage their living costs. This trend is expected to continue as energy prices remain high.

What will Property Prices be in 2025 in the UK? 

Housing price predictions show varied growth across different regions by 2025. These projections reflect the ongoing economic conditions, regional demand and the impacts of recent government policies and market trends.

Overall, UK house prices are projected to experience moderate growth. After a dip in 2024, prices are expected to rise by around 3% in 2025, driven by a combination of falling inflation and more stable interest rates​.

Regional Variations

• London

London is expected to see modest growth of around 2.8% in 2025. The prime central London market is predicted to outperform slightly as it recovers from previous declines

South East and South West:

The South East and South West regions are anticipated to grow by approximately 3.6% and 3.1% respectively. These regions benefit from strong demand and relatively high property values.

• Midlands

Both the East and West Midlands are forecasted to see growth around 3.2% and 2.8% respectively. These areas continue to attract buyers due to more affordable prices compared to the South.

• North West and North East:

The North West is expected to grow by about 3.1%, while the North East may see lower growth around 2.5%. The North West benefits from vibrant cities like Manchester, which are seeing continued investment and development​.

Factors Influencing These Trends

Falling inflation and more stable interest rates are expected to support property price growth across the UK. Mortgage rates have started to stabilise, making borrowing slightly more affordable, which should encourage buyer activity​.

Initiatives aimed at boosting housing supply, such as the pledge to build 300,000 new homes annually, will also play a role in moderating price increases by alleviating some supply constraints​.

Different regions are influenced by varying levels of demand. Areas with strong employment growth and infrastructure investments tend to see higher property price increases​.

By 2025, UK property prices are expected to show moderate growth, with regional variations reflecting local economic conditions and market dynamics. London and the South East will see steady increases, while regions like the Midlands and the North will continue to attract buyers due to their relative affordability and development potential. 

What will Rental Prices be in 2025 in the UK?

The rental market in the UK is expected to see continued growth in 2025, albeit at a slower pace than the rapid increases observed in recent years. Several factors, including economic conditions, regulatory changes and regional differences, will influence rental prices across the country.

• General Outlook for 2025

Rental prices across the UK are projected to rise by approximately 4-5% annually by 2025​.

The anticipated slowdown in rental price growth is attributed to a weaker labour market and slower earnings growth, which are expected to limit the pace at which rents can rise​.

• Central London: Rental prices in prime central London are expected to increase by about 5.5% in 2025, down from the higher growth rates seen in previous years. This slowdown is due to affordability constraints and increased supply as more landlords return to the market.
• Outer London: Outer London is projected to see a 4.5% rise in rental prices. The market here is influenced by similar factors as central London, but with slightly less pressure on affordability​​.
• Regional Cities: Cities in the North, such as Manchester and Newcastle, are anticipated to see rental price increases of about 5% annually. These areas offer greater affordability and continue to attract significant demand.

Why These Trends Are Expected 

• A shortage of rental properties continues to drive up prices. Limited new investment and higher mortgage rates have discouraged new supply, exacerbating the imbalance.
• Legislative measures, including the Renters’ Reform Bill, are impacting the rental market by imposing additional regulations on landlords. These changes are likely to maintain upwards pressure on rents due to constrained supply​.
• The overall economic environment, including slower earnings growth and a weaker labour market, is expected to temper rental price increases. However, the fundamental supply-demand imbalance will continue to support rental growth​.

Overall, the UK rental market in 2025 is set to experience moderate growth, with significant regional variations driven by local economic conditions and housing supply dynamics. 

With interest rates and rising living costs, house prices and property sales are expected to remain sluggish in 2024. However, a robust employment market is likely to prevent a housing market crash. For landlords, there are opportunities to acquire properties at favourable prices, and the rental market continues to grow, driven by a persistent demand-supply imbalance. This trend presents substantial opportunities for buy-to-let investors. For more housing market UK predictions for 2025 and beyond, get in touch with our experts.