UK Real Estate Prices: What’s the Outlook for 2025?

In response to rising prices, homeowners may be considering whether now is the time to sell.
They may be even going one step further, consulting services to determine how much their house is worth before putting their homes on the market.

Despite challenges such as low economic growth and high interest rates, UK home prices continued to trend higher during 2024. According to data compiled by HM Land Registry, home prices increased by 4.6% throughout the calendar year ending Dec. 31, 2024.

Average home values in the UK now stand at £268,000. As home price appreciation persists, even in light of macro challenges, many may believe UK property prices are “due” for a slowdown, or worse, a pullback.

However, considering numerous factors, you may not want to make this assumption. While not certain, it’s very much possible that last year’s home price trends continue in 2025.

Why UK Home Prices Kept Rising in 2024

So, how exactly did UK home prices continue to climb in 2024? After all, for the year, GDP growth in Britain was once again sluggish, with annualized growth of just 0.8%.

While the Bank of England voted recently to decrease interest rates from 4.75% to 4.5%, they remained at elevated levels. Nevertheless, much like in other markets such as the United States, last year’s home price appreciation can be attributed to favourable supply and demand trends.

As demand continues to outweigh tight supplies of new and existing homes for sale, prices continue to trend upward, regardless of other factors like mortgage rates and the macro backdrop.

Alongside this, it’s possible that housing prices have kept trending up, ahead of an expected further lowering of interest rates over the next year or two. It’s possible that this factor not only had a positive impact on housing prices last year; it could continue to place upward pressure on housing prices in 2025.

Housing Market Outlook 2025

Aware of the need to resolve the country’s housing crisis, the Labour-led government of the UK is currently working on efforts to increase the national housing supply by 1.5 million homes over the next four years.

However, skepticism runs high that the Labour government will fully follow through on this promise, first made on the campaign trail during the 2024 UK general election. Critics cite a lack of skilled workers, supply shortages, and other reasons for why housing supply will fail to meet expectations between now and 2029.

Irrespective of whether the plan proves successful, building out so many new housing units will take time. Shortages will remain. Coupled with expected interest rate cuts, and it’s easy to see positive price trends staying constant throughout the year. On top of factors related to supply and interest rates, something else could bode well for home sale prices in the near-term.

That would be the impending sunset of temporary Stamp Duty Land Tax (SDLT) relief. Back in 2022, the UK Government temporarily raised the nil-rate tax threshold for SDLT from  £125,000 to £250,000 for all homebuyers, and from £300,000 to £425,000 for first-time homebuyers.

The Bottom Line

Although there are numerous factors that suggest a slowdown or decline in housing prices isn’t just around the corner, it’s far from set in stone that UK housing prices continue to trend higher throughout 2025. Hence, it’s understandable that some homeowners may want to take advantage of the current “seller’s market” while it lasts.

The looming SDLT relief sunset is helping to drive further increases, but once this short-term factor disappears, much of further housing value growth will hinge on interest rates. With the UK’s inflation rate recently spiking to a 10-month high, 2025 interest rate cuts, if any, could come in far lower than previously anticipated.

In 2025, economic growth could play a larger role in the health of the housing market, outweighing positives such as the housing supply shortage. Even as Q4 2024 economic growth beat expectations, economists surveyed by Reuters still anticipate sluggish growth in their latest updates to outlook.

Please check this –  https://www.gov.uk/stamp-duty-land-tax/residential-property-rates

Can you provide more detail on what is inaccurate here?

Could we include how long the interest rates have been at elevated levels?

The paragraph mentions the elevated rates were made in 2022.