Predicting whether UK property prices will rise or fall this year requires considering economic, social, political, and policy factors. In this feature, I delve into each of these to determine whether it will be good or bad news for homeowners in 2025.

Establishing whether UK property prices will rise or fall in 2025 is far from easy. However, in recent years, I feel that I’ve been fairly accurate with my predictions. After all, Luxurious Magazine was one of the few news platforms that scoffed at the notion that prices would drop at the outbreak of the pandemic, accurately predicting a healthy rise due to pent-up demand and a willingness for buyers to seek ‘greener’ pastures.

Although my crystal ball has been locked away in a cupboard for a couple of years, given the current geopolitical and economic uncertainties, I felt it was time for it to see the light of day.

To establish whether prices would rise or fall and by how much, I needed to wade through the available data, read social commentaries and opinion pieces, and add some good old-fashioned common sense to the mix. Before I go into what I uncovered, I feel it is fair to divulge that I am a UK property owner, which means I will have an unconscious bias.

When it comes to property, there are two main camps: those who want prices to rise, predominantly comprised of homeowners, and those who want prices to fall, which consists of people waiting to get onto the ladder; however, once the wannabe homeowners put a foot on the property ladder, they’ll enthusiastically join me and millions of others hoping that the data will point to a rise.

Delving into the Data
Despite strong headwinds, and according to sources including the Halifax, Nationwide, and the UK Land Registry, the UK housing market once again showed its resilience in 2024, with prices rising around 4-5%.

Reading through existing forecasts, most property experts expect modest continued growth in the 2-4% range. For example, Savills sees a 4% increase, and the property portal Rightmove predicts a similar 4% rise; however, their number is based on asking prices, while Zoopla is forecasting a more conservative 2.5%.

On the upper end of the scale, Capital Economics is predicting a rise of 5%, while the Office for Budget Responsibility (OBR) is more cautious at 1.1%; perhaps they know something that others don’t.

The above 1-5% spread does tend to reflect a certain degree of uncertainty. However, the consensus is that prices are unlikely to crash and will experience a modest rise.

Several factors support this outlook, such as the Bank of England’s cutting interest rates to 4.5%, which has lowered borrowing costs and boosted buyer affordability. However, the recent rise in UK inflation to 3% could muddy the waters somewhat.

Additionally, data shows that wages are currently rising at a faster rate than inflation (OBR prediction is 3.5% wage growth). Although many will no doubt argue with this, data indicates that the cost-of-living crisis has also eased.

However, the ending of stamp duty relief on March 31st will likely dilute much of the above and could dampen Spring demand, which could rein-back price growth, particularly in the lower to mid-range price brackets.

Regional Variations
Regionally, it is likely to be a mixed picture. Northern regions: the North West, which will be the subject of a separate feature, the North East, Yorkshire, and Scotland will probably see stronger growth (up to 5%, per Savills), driven by better affordability. However, the South East and South West could lag with an increase of just 2.5% due to stretched affordability.

London could rebound with 4% growth (Hamptons’ forecast), fueled by office returns and international buyers, though high-end properties might dip due to tax changes.

The Factors that Could Affect the Direction of House Prices
Property prices are influenced by a complex mix of global political and economic factors alongside domestic conditions.

Political instability around the world will be a significant factor in determining the direction of UK house prices. If an influential region such as the EU becomes embroiled in political upheaval, let’s say through a trade war with the U.S. or multiple leadership crises, it can produce a ripple effect.

Should this happen, which is not beyond the pale, investors might see the UK as a safer haven, and they could put their money into property (likely London), which would boost prices.

Economically, interest rates are king. The Bank of England often moves in tandem with the U.S. Federal Reserve or European Central Bank. Should global inflation spike due to oil price shocks or problems with supply chains, central banks could hike rates, which means that borrowing costs will rise, too.

Higher mortgage costs will result in a drop in demand and a softening of prices. However, there is a flip side: if the world moves into recession, interest rates will likely be lowered to stimulate growth, opening the property market floodgates to investors.

The strength of the UK pound is another factor that needs to be considered. A weak pound makes UK property very enticing for international buyers, while a strong pound has the opposite effect. This can be seen after the Brexit referendum in 2016, when the strength of the pound fell, which coincided with a spike in foreign investment.

In addition to the above, other factors need to be factored into the equation, such as the global trade flow and potential supply chain disruptions, which could increase construction costs and hamper developers.

In summary, rising prices could be subject to various factors, including global stability, low rates, a weak pound, or inbound investment. In contrast, a fall in property prices could stem from geopolitical chaos, high global rates, a strong pound, or retreating foreign capital.

My Conclusion
Barring significant shocks, I forsee UK property prices rising between 4% and 5% in 2025. As mentioned, I am a homeowner, and my opinion might be subconsciously biased.

However, given that the UK population is growing at an incredible rate and there is not enough housing available, and unless the country switches its primary focus to building social housing, I can only see private residential property prices going one way at this time.

Due to the changes in stamp duty, there is a chance of a Spring-time lull, with any impact varying from region to region. Those areas with comparatively lower prices will benefit the most and might not notice any reduction in activity if a lull happens.

Even though we live in confusing, rapidly changing times, based on the information to hand, there is currently nothing to indicate there will be a house price crash in my crystal ball.