Group Managing Director of BuyAssociation, Sam Hadfield, shares his 2025 UK property market predictions…
2024: A Year of Recalibration
As we step into 2025, it’s worth reflecting on the UK property market over the past year. 2024 marked a period of adjustment and recovery, following the challenges of 2023. While the broader property market faced headwinds from rising interest rates and cost-of-living pressures, there were key opportunities for savvy investors, particularly in off-plan and particularly in regional cities, to hone in on.
A look back at my 2023 Predictions:
Last year, I highlighted that 2024 would likely outperform 2023. My expectation that the market would bottom-out in the first half of the year and then see renewed activity in the latter half played out as predicted. Indeed, the resilience of the build-to-rent (BTR) sector and the rental market’s strength underscored the increasing resilience of the sector within the UK property landscape.
We also witnessed the gradual easing of lending conditions by the Bank of England, leading to meaningful reductions in mortgage rates. This shift catalysed a late-year surge in transactions and price stabilisation, particularly in regional hubs such as Manchester, Birmingham, and Leeds.
2024: Key Highlights
One of the most significant developments in 2024 was the resurgence of pent-up demand from both first-time buyers and seasoned investors. On the back of a subdued 2023, the easing of affordability constraints unlocked activity in 2024.
Regional cities once again outperformed London, as affordability and rental yield considerations continued to drive demand away from the capital, with graduates and young professionals continuing to target the regional cities in volume.
At BuyAssociation, we saw strong investor interest in projects outside of major metropolitan areas, particularly in well-connected commuter towns. Locations like Stockport, Trafford and Altrincham around Manchester, as well as Birmingham’s Solihull and Sheldon benefitting from a “ripple effect” spilling over from the city centre’s own boom.
The build-to-rent market, as seen in recent years, continued to demonstrate its strength. Demand from “generation rent” and young professionals remains robust, as the supply of high-quality, amenity-rich rental stock lagged behind demand.
What Lies Ahead in 2025?
Interest Rates: A Gradual Decline
Interest rates will continue to play a pivotal role in shaping the property market in 2025. Following the Bank of England’s cautious approach to monetary policy in 2024, it’s anticipated that rates will see a gradual decline. While some are pushing a more aggressive cut to nearer 3%, I believe that by mid-2025, we may see rates settle at around 4%. A more modest reduction yet providing much-needed relief for buyers and investors alike. Lower borrowing costs are expected to (will) stimulate further activity, particularly in the second half of the year.
Price Predictions
While 2024 laid the groundwork for stabilisation, 2025 is likely to bring price growth. The combination of improved affordability and sustained demand will contribute to a steady upward trajectory across most markets. And with most commentators predicting growth for at least the next 5 years (23.4% average according to Savills) the confidence is there for investors to get excited about buying.
Regional cities and commuter towns will continue to out do the capital, broadly in the range of 3% to 5%. In contrast, the London market will likely experience slower growth, with increases closer to 1% or 2%, as affordability constraints persist.
The skill, as ever, is in identifying those smaller pockets of regeneration that will outperform the averages.
1. Regional Growth to Continue
Regional cities will likely remain the engine of the UK property market. The ripple effect from major city centres will further elevate demand in secondary towns with strong transport links and regeneration plans. Manchester locations such as Trafford, Stockport, Cheadle, Chorlton and Prestwich, are primed to see increased investor interest. The trends from this year suggest that the pockets on the edges of our regional cities will perform well.
2. A Shift in Buyer Profiles
As affordability improves, first-time buyers who were priced out in previous years will re-enter the market. We are already seeing this across our marketing and web enquiries.
Simultaneously, retail investors will continue to prioritize rental yield and growth potential, with regional properties offering a compelling case.
Despite falling borrowing costs, we will continue to see a trend for investors using more cash and less funding on their purchases.
3. Build-to-Rent Sector to Thrive
The BTR sector shows no signs of slowing down. With homeownership increasingly delayed among younger demographics, professionally managed rental properties in urban cores will maintain their appeal. This asset class remains a safe bet for investors looking for consistent returns.
What may change is the volume of BTR funds, with developers favouring the factional sales model, something we feel is ultimately better for the UK property stock with those properties ultimately becoming available for private sale.
4. Focus on Sustainability
Sustainability is becoming a non-negotiable factor in property development. Energy-efficient homes and retrofitting existing stock to meet environmental standards will gain momentum, supported by government incentives and evolving buyer preferences. Of course everyone wants to be environmentally conscious, but the increasing cost of our energy is actually the main factor accelerating this movement and EPCs are often top of the list with investors and tenants.
5. Technology and Smart Living
The integration of smart home technology will be a differentiator in 2025. Developments offering tech-enabled living solutions, from app-controlled heating to co-living spaces with shared amenities, will attract a tech-savvy tenant base.
Lessons from the Past Year
The property market’s performance in 2024 reinforced the importance of flexibility and foresight. At BuyAssociation, our focus on regional markets and build-to-rent projects proved resilient amid broader market fluctuations.
As an example, our involvement in Stockport’s regeneration exemplifies how targeted investments in well-connected, growing areas can yield strong results.
Final Thoughts
All in all, 2024 has been a strong year for the market, recalibration was both necessary and ultimately beneficial, laying the groundwork for what I believe will be a steady period of sensible growth in 2025 and beyond.
Whether you’re an investor, a first-time buyer, or a developer, 2025 looks set to offer opportunities for those ready to act.
Yes, it can be brilliant when things boom! However, for an active investor with no plans to leave the market – give me steady with a side of confidence any day!
