UK Property Market in 2025
Over the course of 2023 into 2024, property values have seen decent growth, rising by 9.1% in the 12 months to November 2024. This is a significantly stronger performance than initially predicted, with Savills stating in November 2023 that they anticipated a -3% dip in UK property values for 2024. This unforseen increase in property values comes as a result of improving market conditions – from the anticipation and subsequent reduction of the Bank of England base rate, to improving mortgage rates, and the resulting rebound of demand for properties.
The most up-to-date predictions for the UK property market in 2025 and beyond reflect this positive sentiment, with Savills’ new outlook for the UK property market forecasting a 3.5% increase to property prices across 2025. This trajectory is set to improve, with subsequent forecasts for 2026 and 2027 stating that property values will see a 4.5% and 5% boost respectively. JLL’s forecasts are similar to Savills, albeit marginally more modest by suggesting a 3% increase to property prices in 2025, followed by 3.5% and 4.5% increases in the years after.
Should these predictions be true, this would mean the UK property market will experience cumulative growth between 2024 and 2028 of 21.6% according to Savills. This remains in-line with the property price growth of the past 4 years, which is 22.7% from June 2020 to June 2024 according to data from the UK House Price Index.
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UK Rental Market in 2025
Although the average UK house price saw a modest increase of 3.4% over the past year to November 2024, the rental market has far outpaced this by seeing a much more significant increase of 9.1% over the same period. Despite this impressive increase in rental values, renting is still cheaper than buying a property across the vast majority of the UK, with the latest Halifax Owning vs. Renting Review finding that only London, the South West and Scotland were cheaper for home-buyers. This is a strong testament to the appeal of the rental market.
According to a collection of sources such as JLL, Savills and Zoopla, the most promising cities for rental price growth in the coming years are Manchester, Birmingham and Edinburgh. As the London exodus continues, these large cities are attracting movers thanks to their ample job opportunities, cheaper rental prices and thriving cultural scenes.
Speaking of cheaper rental prices, renting is still cheaper than buying in 9 of 12 cultural regions across the UK – this has not been the case since 2010, and demonstrates how the vast majority of UK residents currently renting will remain stuck in the cycle of letting their homes for the foreseeable due to the financial pressures of buying. As frustrating as this is for tenants hoping to get on their property ladder, this spells good news for buy to let investors.
UK Supply & Demand
According to the July 2024 UK Residential Market Survey, RICS stated that tenant demand is on the rise, but new landlord instructions are starting to decrease. This insinuates that tenant demand is likely set to become stronger as 2024 concludes and 2025 begins, with the number of available properties on the market for rent becoming fewer and fewer. This is corroborated by a Zoopla study which found that each rental property has an average of 15 prospective tenants competing for it, demonstrating that this is certainly a landlord’s market.
We anticipate that this supply and demand imbalance will not ease for some time despite the new pledges from the Labour government to build 1.85 million homes during their tenure, as completion of these properties will be years into the future.
The number of residential transactions has also started to decrease, with June 2024 marking the first downturn in transactions since December 2023. Although only a marginal downturn of 1%, this is countered by an increase in new rental prices month-on-month of 0.7% over the same period. This increase in rental values compared to a dip in residential transactions indicates that the supply and demand will remain strong into 2025, with competition in the rental market continuing to increase prices.
There are more robust plans in place to construct more homes across the UK, with the incumbent Labour Government pledging to construct 1.85 million new homes over their tenure. However, we do not anticipate that this will turn the tides of the supply-demand imbalance anytime soon – firstly, these units will take years before they come to market, and secondly, the government’s focus on providing accommodation for first-time buyers could still mean that there will be a relative undersupply of properties available for buy-to-rent, thereby maintaining this imbalance that favours residential landlords so strongly.
Want to know more about the UK property market for 2025? Download the UK Investment Guide today and discover everything you need to know about UK property investment in the new year. In this guide you’ll find:
- Current market performance
- Forecasts for the UK property market in 2025
- Key trends impacting the market
- Best places to invest in 2025
UK Economic Performance in 2025
According to the Office for National Statistics (ONS), UK GDP grew by 0.1% in Q3 2024 and 0.5% in Q2, with the UK economy now sitting 3% above pre-pandemic levels. This puts the UK ahead of the likes of the Eurozone, Japan, Germany and France for economic growth quarter-on-quarter. This comes after a fantastic quarter for the UK economy wherein the Bank Of England reduced their Base Rate for the first time since 2020, inflation hit its 2% target, and mortgage rates have become increasingly affordable for homebuyers and investors alike.
What’s more, the UK’s brief period of recession at the end of 2023 wherein the economy shrank was swiftly reversed, with the economy subsequently growing by 0.6% between January and March 2024. This speedy reversal of economic hardship has boosted consumer sentiment and business confidence – in fact, the UK Business Confidence Index rose to +16.7 in Q2 2024, its highest rate since Q1 2022, signalling a dramatic turn of tides.
This improvement to UK economic performance spells good news for property investors, suggesting that capital growth across the property market will be strong in the coming years as confidence and demand for UK property continues to strengthen.
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Strong City Centre Performance
Over the past number of years, there has been a strong boost to UK city centre performances. This marks a change from the property market of the pandemic, wherein countryside and rural properties became more desirable for the abundance of space they could offer. However, as modes of working have shifted away from remote working and towards more hybrid models, residential tenants have returned to city centres to look for their next home.
JLL’s predictions for 2024-2028 highlight this strong forecasted rental growth in UK cities, most notably in Manchester, Birmingham and Edinburgh, some of the UK’s largest cities. These locations are predicted to see cumulative growth until 2028 of 21.7%, 22.2% and 22.2% respectively – far above the national average of 18.8% – serving as a testament to the power of big UK cities.
This is reflected in property values too, with Leeds, Manchester and Birmingham – some of the largest cities in England – set to see 18.8%, 19.3% and 19.7% property price growth over the same period, comfortably outpacing the national average of 17.6%
Going forward, growth in the UK – particularly in cities – will be dictated by demand for property and interest rates. While rates are expected to fluctuate in the years to come, the consensus is that there’s enough demand in the market to sustain the current levels of activity.
Frequently Asked Questions
Is buy-to-let a good investment?
If you were to measure how ‘good’ a buy-to-let investment is based on its past performance, this asset would probably come out on top. However, different assets will suit some more than others based on their financial goals.
If you’re looking for a resilient asset that can offer a passive income as well as the opportunity for capital growth, buy-to-let property could be the best asset for you.
With JLL suggesting that UK property values could see a cumulative boost of 17.6%, and a rental price boost of 18.8% until 2028, forecasts suggest that buy-to-let property could be the route to financial freedom for many investors.
Is buy-to-let worth it?
When it comes to investing there’s generally no ‘one size fits all’ approach and buy-to-let property will suit some investors more than others.
However, for those who are looking for a long-term investment asset with a track record of competitive growth and more price increases on the horizon, buy-to-let is often the best option.
Buy-to-let is a flexible investment assets and can offer diversification across a wider portfolio. It’s historically one of the most stable assets and is much less exposed to external factors, plus it’s a physical asset, which makes it appealing with certain investors.
The answer to ‘is it worth it?’ depends entirely on how you use it. If you use it as a long-term asset, it’s proven to be a potentially lucrative investment vehicle that can be scaled effectively.
Why invest in UK property?
UK property is recognised as one of the most appealing investment assets across the world. In comparison to other markets, the UK property market is not only resilient, but it can offer consistent short- and long-term returns.
While rental income can usually cover the monthly payments of the property and then some, this asset also grows over time. UK property prices have been on a consistent upward trajectory and have recovered well from the unease of 2021’s pandemic property market which saw some sharp peaks and troughs: a testament to the long-term resilience of this asset class. What’s more, the average property is worth 87% more now than it was a decade ago according to the Land Registry UK House Price Index, demonstrating the potential for capital growth.
The answer to ‘is it worth it?’ depends entirely on how you use it. If you use it as a long-term asset, it’s proven to be a potentially lucrative investment vehicle that can be scaled effectively.
Will prices fall in the UK?
There is no strong evidence that UK property values will fall in the next few years. Predictions from the likes of Savills and JLL agree that the property market is on a strong path of continued growth, with each year until 2028 forecast to experience at least 2% property price growth and 3% rental price growth according to JLL.
Where to invest in buy-to-let in the UK?
Understanding where to invest in buy-to-let in the UK continues to be a tough decision for many investors, especially with so many potential locations in the country.
The best way to answer this question is to establish what you’re looking to achieve. Do you have short or long-term goals? Are you looking for capital growth or rental yields?
If you’re looking for more immediate rental returns, you’ll need a location with high yields and strong tenant demand. Look to established cities such as Birmingham and Manchester which have undeniably strong tenant demand, great job opportunities and an abundance of inner-city amenities.
On the other hand, if you’re investing for capital growth, you’ll want to identify areas that are regenerating and redeveloping the surroundings. This kind of activity often pushes property prices higher, which can deliver appreciation over time. Look to up-and-coming cities that are attracting those participating in the London exodus and experiencing swathes of regeneration, such as Leeds.
What is a good rental yield on property in the UK?
Rental yields are arguably one of the most important metrics for prospective investors to consider, but what is a good rental yield?
The average rental yield in the UK currently sits at 5.37% based on an average property purchase cost of £284,000 and an average monthly rent of £1,271, meaning anything over this amount is considered an above average – or good – rental yield.
The likes of Leeds and Manchester are far surpassing the UK average and are prime examples of some of the highest rental yields in the UK, achieving yields of 5.61% and 6.22% respectively. This isn’t to mention that certain postcodes will achieve even greater yields, which is why it is important to carry out diligent local research before you purchase your next buy-to-let investment property. You can check out our Best Places To Invest In UK Property In 2025 guide for a postcode breakdown of the best cities in the UK for yields.