Predictions for the sales market in 2025

28th November 2024

For a ‘normal’ property market, with good sales and rising property prices, it’s essential we have a stable economy with a base interest rate of 4% or below. So it’s positive news that on 7^th November, the Monetary Policy Committee reduced the base rate by 0.25% to 4.75% and it’s forecast to keep falling. Although future cuts are now expected to be slower than was predicted pre-Budget, the Bank of England and the OBR still believe it will be down at 3.6%-3.8% by the end of 2025.

It's also good news that the Government has announced additional funding to drive through the building of more new homes and re-committed to delivering 300,000 a year, with a particular focus on affordable housing. The more homes there are available for sale, the more people are encouraged to buy and the whole housing market gets a boost.

Although the Autumn Budget confirmed that the Stamp Duty threshold for first-time buyers will drop back from £425,000 to £300,000 in April, this still means that most people should be able to buy their first home tax-free. With average wage growth at more than double the rate of inflation, more affordable homes being built and the First Homes scheme offering FTBs the chance to buy a new-build for 30%-50% less than its market value, this critical sector of the homebuying market should keep things moving.

“The rapid growth in rents and the decline in mortgage rates have shifted the renting vs buying dynamics and supported more FTB purchases. The average mortgage repayments for a typical UK first-time buyer home are 17% cheaper than renting, compared to a difference of just 2% a year ago, when mortgage rates were higher.” – Zoopla, UK House Price Index October 2024

What’s likely to happen to property prices in 2025?

According to Zoopla, average house prices rose by just 1% in the year to September 2024, thanks to a large choice of homes for sale, and affordability pressures keeping buying power in check.

However, following the Budget, real estate consultants JLL commented that the outlook is more positive, with average house prices expected to rise by 20% over the next five years, driven by a continuing lack of supply versus demand and more competitive mortgage rates.

It’s worth noting that in terms of new housebuilding, JLL forecasts the Government will fall short of its five-year target by 500,000, due to “current planning, labour force and supply chain constraints”, which will keep the pressure on the supply pipeline, pushing prices upwards.

What do our own experts say?

Kevin Shaw, Sales Managing Director at Leaders Romans Group (which we're part of), says, “The announcement of inflation increasing is a lead economic indicator that makes another interest rate cut most unlikely, and we are potentially now looking at March. This would be good timing for the spring housing market. Previous predictions of interest rates going as low as 3.75% at the end of 2025 now appear to be overly ambitious. Three 0.25% reductions would take interest rates down to 4%, which would strike a reasonable balance and result in mortgage products being available at 3.5% given qualifying criteria.

"Interestingly, since the budget at the end of October, the number of first-time buyers registering across our network has risen by 12% month on month. Many of these are undoubtedly trying to move before the change in Stamp Duty at the end of March.

"In addition, our data at Leaders Romans Group indicates that January starts off with a bang, with applicant numbers increasing from the beginning of the month, and we are anticipating the same next year. Sales tend to follow two to three weeks later, peaking around the middle of February (it is Valentine's after all) and remaining buoyant at least up until Easter. The New Year always brings renewed optimism, especially with vendors, and we expect the general market sentiment to improve, edging prices up. How much they increase will depend on interest rates, the March budget, and the larger economic backdrop. We are forecasting house price growth of around 3% to 4% in 2025, with more scope in the Midlands and North due to affordability factors further south.”

Daniel Gale, Head of Auctions at our sister company First for Auctions, says, “Guide price uplift has been a consistent theme, with 2024 seeing strong results across our auctions. This trend is expected to continue, as competitive bidding reflects high demand for realistically priced properties.

“As we look ahead to 2025, the property auction sector is expected to face both challenges and opportunities, with several key factors shaping the market. Auctions will become an appealing option for landlords seeking a swift exit strategy, especially as compliance costs rise. This shift is likely to bring a variety of rental properties to the auction market, providing valuable opportunities for buyers.

“With interest rates projected to stabilise, or even begin to decrease, we anticipate a renewed interest from investors looking to reinvest capital into property as a way to achieve strong returns. Property remains a reliable investment, and as rates ease, buyers will be more inclined to re-enter the market through auctions, where they can secure assets in a fast-paced, transparent environment.

“A defining feature of the properties we're bringing to auction is their minimal renovation requirement. Unlike previous years, many of the buildings currently available do not demand extensive work. This means buyers can acquire properties that are nearly ready for occupancy or investment, making auctions an even more attractive option in 2025.”

While national average figures and UK economic forecasts are a helpful indication of trends for the property market, as always, it’s important to focus on activity in your own local area. One micro-market can be very different to another in terms of supply and demand, and also very different to the averages quoted in the media.

To find out what’s happening at a local level, and what our own experts expect to happen in 2025 and beyond, simply get in touch with your nearest branch and one of the team will be very happy to help.