UK House Prices & Property Sales to Rise in 2025

The UK property market is looking toward 2025 with great optimism. Estate agents are hopeful about rising house prices and sales even as worries about high borrowing costs and economic stagnation persist.

A recent survey by the Royal Institution of Chartered Surveyors (RICS) points to a positive outlook, but what’s driving the confidence, and could the market’s strength be tested in the coming months?

What’s Behind the Optimism?

The RICS survey, a trusted indicator of market sentiment, showed that 37% more estate agents expect home sales to rise than those who predict a decline in the next year. Even more encouraging, 53% anticipate house prices will surge. The optimism is widespread across all regions of the UK. 

RICS economists have called the outlook “solidly positive” despite rising bond yields and mortgage rates. He said steady demand is a major reason for the improving confidence in the market.

Mortgage Rates: A Key Variable

Mortgage rates are a big concern for both buyers and sellers. In December, the average two-year fixed rate for a 60% loan-to-value rose to 4.47%, up from previous months but still much lower than the peak of 6.22% in July 2023. 

However, industry experts warn that the current optimism could be shattered if borrowing costs jump sharply in the months ahead. Higher mortgage rates could make it harder for buyers and developers as the government works toward its goal of building 1.5 million homes during this parliamentary term.

House Prices & Sales Gaining Momentum

House prices continued to grow in December. The RICS house price index climbed for the fifth month in a row. Estate agents also reported more sales agreements, a big improvement after three years of mostly negative trends. 

This could partially be because the upcoming changes to stamp duty have pushed buyers to act quickly. The temporary stamp duty holiday ends in April 2025, and after that, the threshold for first-time buyers will slump from £425,000 to £300,000. This has added urgency for many buyers to finalise their purchases now.

Rental Market Pressures Persist

Though home sales are picking up, the rental market is struggling. RICS reported a small drop in demand with a balance of minus 3 ― meaning more estate agents were reporting a slide in demand for rental properties than those seeing an increase ― and a sharp plunge in new properties from landlords.

This mismatch between supply and demand is pushing rents higher. 37% of surveyors expect more increases in the next three months. 

Official data also backs this up: house prices rose 3.3% in November 2024 compared with a year earlier. Private rent rose even more by 9%, with London being the most expensive area.

However, the wider economy is still worrying. In December, the UK’s 10-year gilt yield rose because of concerns about stagflation, where the economy grows slowly while inflation remains high. This could increase borrowing costs and dampen the optimism in the property market.

However, recent data showed an unexpected slowdown in inflation toward the end of 2024, which gave some relief and caused bond yields to fall slightly. Whether that trend continues will likely have a big impact on the future of the housing market.

Conclusion

As the UK property market heads into 2025, a sense of optimism is in the air. Estate agents across the country are hopeful, many are expecting house prices and sales to rise. However, rising mortgage rates and concerns like stagflation could damper the positive outlook.

Although the housing market is picking up speed, the rental market is facing difficulties with rents set to rise due to a lack of available properties. The coming months will be crucial, as inflation and borrowing costs will shape the market’s path.