The next two years of housing: House prices in 2025

by | Dec 11, 2023 | Moving, Property

For those planning on buying or selling a house there’s a pressing question – what will house prices in 2025 look like compared to today?

Since the housing market’s peak in 2022 prices have fallen rapidly as high interest rates discouraged potential first-time buyers. Concerns around the proposed Renters Reform Bill also cooled interest in the Buy-To-Let sector.

Now, the first industry experts are beginning to predict the recovery of the UK housing market. What can we expect from the next two years?

 

 

UK House Prices in 2025 will continue to fall

Lloyd’s Banking Group, Britain’s largest mortgage provider, predicts that house prices will continue to fall until 2025. In October the lender, which owns Halifax and Bank of Scotland, projected that prices would fall a further 2.4% next year. This would be a total drop of 11% from their peak last year, before beginning to recover.

In 2025, Lloyds expect house prices to rise by 2.3%, while fellow lender Santander has predicted a rise of just 2%. While small, these rises indicate welcome early signs of recovery for the beleaguered housing market.

 

… but prime London house prices in 2025 will buck the trend

Researchers from estate agent Savills believe that not all house prices in 2025 will fall, with those in central London proving more resilient. In fact, prices in the prime market, the top 5-10% of domestic properties, will not fall at all in 2024.

By 2028, prices for these desirable central London properties will rise by 18.7%, with a 6% rise in 2026 alone. Outside of central London, properties in this prime bracket are expected to grow in value by 4.5% in the same year.

 

Mortgage rates will drop in 2024 and beyond

Online estate agency Zoopla say Mortgage rates will remain high at the start of next year. However, they do expect a fall back to around 4.5% in Q3 and Q4 of 2024.

Savills are also predicting a drop in the Bank of England’s base interest rate of 0.5%, reaching 4.75% by the end of next year. Looking further ahead, Savills has projected rates will continue to fall, with the base rate hitting 1.75% by 2027.

 

Cash buyers will be king in 2024

With mortgage availability still recovering, cash buyers are expected to rule the market for the first half of 2024. Zoopla describes the current UK market as ‘a buyer’s market’, with the average property selling for £18,000 less than the asking price in late 2023.

Zoopla has also predicted that cash buyers will be the ‘biggest group’ of buyers in 2024, followed by first-time buyers fleeing rising rents. This reflects what we’ve seen so far this year, with cash buyer activity 3.5% higher than the 2017-2019 average despite the generally depressed market.

 

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