Real Estate Prices in the UK: What Are the Prospects for 2025?

In response to rising prices, property owners may consider whether it's time to sell their flat or house. They might even go further and use services to determine the value of their property before listing it for sale.

Despite challenges such as low economic growth and high interest rates, real estate prices in the UK continued to rise in 2024. According to data collected by HM Land Registry, housing prices increased by 4.6% over the calendar year ending December 31, 2024.

The average cost of housing in the UK is £268,000. As price growth continues, even in the face of macroeconomic challenges, many believe that real estate prices in the UK 'should' slow down or even fall.

However, given a variety of factors, you may not want to make such assumptions. While this is not definitively established, it's quite possible that the trends in real estate prices from last year will persist into 2025.

Why UK Real Estate Prices Continued to Rise in 2024

How exactly did real estate prices in the UK continue to rise in 2024? Despite a weak GDP growth of just 0.8% for the year, the UK economy still showed signs of resilience.

Although the Bank of England recently decided to reduce interest rates from 4.75% to 4.5%, they remain at a high level. Nonetheless, as in other markets like the US, the increase in real estate prices last year can be attributed to favorable demand and supply trends.

Since demand continues to exceed the limited number of new and existing homes available on the market, prices continue to rise regardless of other factors such as interest rates and macroeconomic conditions.

Additionally, real estate prices may continue to rise ahead of the expected further reduction in interest rates over the next one or two years. This factor could not only positively influence real estate prices from last year but also continue to pressure price increases in 2025.

Real Estate Market Outlook for 2025

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

However, skepticism is high, as many believe that the Labour government will not fulfill this promise made during their 2024 election campaign. Critics point to a shortage of skilled labor, supply deficits, and other reasons why housing supply will not meet expectations by 2029.

Regardless of whether this plan succeeds, building such a large number of new homes will take time. The deficit will remain. Combined with the anticipated fall in interest rates, it's easy to see that positive price trends will persist throughout the year. Beyond supply and interest rate factors, something else could also be favorable for real estate prices in the near future.

This will nearly eliminate a temporary relief period for Stamp Duty Land Tax (SDLT). In 2022, the UK government temporarily raised SDLT thresholds from £125,000 to £250,000 for all home buyers and from £300,000 to £425,000 for first-time buyers.

Conclusion

While there are many factors suggesting that a slowdown or decline in real estate prices is imminent, it cannot be definitively stated that UK property prices will continue to rise in 2025. Therefore, it's understandable why some property owners want to take advantage of the current 'seller’s market' while possible.

The soon-to-end temporary SDLT relief contributes to continued price increases, but once this short-term factor disappears, most of the further property value growth will depend on interest rates. Given that inflation in the UK recently reached its highest level in ten months, any rate cuts in 2025 may be much lower than previously expected.

In 2025, economic growth could play a more significant role in the state of the real estate market than positive factors like housing shortages. Even if fourth-quarter 2024 economic growth exceeded expectations, economists surveyed by Reuters still anticipate a weak expansion in their latest forecasts.

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

Can you provide more information about what is incorrect here?

Is it possible to add details on how long interest rates have remained high?

The paragraph states that elevated rates were introduced in 2022.