Daniel Chard, Partner at conveyancing specialist Bird & Co, provides insights into his forecasts for the housing market and highlights the property trends expected to dominate in 2025.
The housing market is a dynamic and ever-evolving sector, highly responsive to economic and political fluctuations. 2024 has emphasised this sensitivity, with factors such as economic volatility, the cost-of-living crisis, and a change in the UK government.
In this article, we will reflect on our 2024 housing market predictions and evaluate their accuracy to provide a snapshot of the year’s housing trends. We will then present our forecasts for 2025, covering key topics such as housing demand, mortgage rates, and property prices, with the aim of offering homebuyers a clearer perspective on what to expect in the coming year.
Housing Market Predictions 2024: Were we Right?
In 2023, researchers at Bird & Co revealed their housing market predictions for 2024. The key points evaluated were as follows:
- Mortgage rates will go down
- Demand for housing will increase
- House prices will fall and subsequently stabilise
- Housing transactions will increase
- Young people will leave the bustling and expensive boroughs of London for areas such as Wales, the North East and the South West
- Landlords will sell up
- The construction of sustainable new builds will increase
- AI will enable more efficient transactions
As 2024 draws to a close, we can reflect and ask: were our predictions accurate?
Mortgage Rates, Property Prices, Housing Demand and Transactions in 2024
Mortgage Rates Decreased
As anticipated, mortgage rates declined in 2024 (although perhaps not as drastically as we expected), driven in large part by the Bank of England's decision to lower interest rates, first from 5.25% to 5% in August and subsequently to 4.75% in November.
As such, mortgage rates have declined since their peak in June of 2023, when the average five-year fixed-rate mortgage with a 75% loan-to-value ratio reached 5.8%. In fact, research shows that the average rate for the same type of mortgage dropped to 4.7% by the end of 2024, and a 2-year-fixed rate with a 75% loan-to-value ratio is currently 4.86%.
House Prices Decreased
Bird & Co’s predictions about house prices have also proven to be accurate. In December 2023, the average house price in the UK stood at £285,000, whereas in October 2024, it was marked as £267,200.
Housing Demand Increased
As a result of the easing of mortgage rates, housing demand has increased in 2024. Additional contributors include more pragmatic pricing strategies adopted by sellers and a notable increase in market confidence. Notably, August experienced a remarkable 20% surge.
Property Transactions Increased
Considering these developments, it’s hardly surprising that house transactions have risen in 2024. In October of this year, UK residential property transactions showed significant growth.
The seasonally adjusted estimate reached 100,410, marking a 21% increase compared to October 2023 and a 10% rise from September 2024. Meanwhile, the non-seasonally adjusted estimate stood at 111,100, reflecting a 23% year-on-year increase and a 17% month-on-month improvement.
The Development of Sustainable New Builds in 2024
In 2024, sustainability has evolved beyond a mere trend, reflecting a growing awareness of the impact of human actions on the planet. Research has shown that, with the effects of climate change becoming increasingly evident, environmental concerns are now at the forefront of public consciousness.
In 2023, we identified Bristol as a leader in sustainable housing initiatives, and this prediction has been realised. In August 2024, it was reported that a national housebuilding company has submitted plans to redevelop a 40-acre site in Bristol - located next to Brislington Park and Ride - into a residential community featuring 555 new homes.
Migration Out of London in 2024
It has been found that the number of people relocating out of London has risen. Between January 2023 and September 2024, there was an 8% increase in the number of movers leaving London compared to those choosing to stay. However, it has not been specified that these figures were dominated by young people.
Although we anticipated that Wales, the North East, and the South West would emerge as popular destinations for Londoners, BBC News affirmed that the Home Counties have proven to be the preferred choice. This trend is particularly evident among homebuyers with young children, drawn by more affordable housing and access to better schools.
Landlords Selling Up in 2024
It was reported in November 2024 that, in the previous 12 months, 19% of landlords in the UK sold their properties, while only 8% invested in new acquisitions. As predicted, this trend has been heavily influenced by the requirement of landlords to implement energy-efficient upgrades to comply with the government’s new Energy Performance Certificate (EPC) standards by 2025, alongside the pressures of the cost-of-living crisis.
AI Aiding the Property Sector in 2024
Although there aren’t specific figures to display the numerical effect of artificial intelligence on the property sector in 2024, research has shown that AI has affected the real estate industry by enhancing how real estate agents and investors evaluate property values and forecast market trends. For example, AI-driven chatbots now offer round-the-clock support to prospective buyers, handling inquiries and arranging viewings autonomously.
Housing Market Predictions 2025
It appears that many of our predictions for the housing market in 2024 have materialised. Let’s see if we can make accurate housing market predictions for 2025…
When Will Interest Rates Go Down in 2025 and How Will This Affect Mortgage Rates?
Predicting the trajectory of interest rates in 2025 is challenging, as it largely depends on whether inflation stays consistently at or below the Bank of England's target level. However, we can take factors put forward by researchers into consideration to make an educated prediction.
Due to the new government's October budget, we could expect interest rates to fall more slowly over the next year. What’s more, estimates indicate that Donald Trump’s proposed import tariffs could cost the UK billions, a prospect that is likely to weigh on the Bank of England's policy decisions regarding interest rates in the months ahead.
On the other hand, as we have seen in 2024, the Bank of England has striven to manage interest rates to stimulate economic growth amid ongoing global economic challenges.
The decline in their base interest rate has caused mortgage lenders to decrease their rates this year. Therefore, we can expect, with optimism, that in 2025, interest and mortgage rates will follow the downward trend of 2024.
House Prices Will Increase Moderately in 2025
We anticipate that, after stabilising in 2024, house prices may see a modest recovery in 2025. Our reasoning for this lies in the fact that lower and stable mortgage rates in 2025 might encourage more people to buy homes, pushing up prices slightly. However, affordability concerns will limit steep increases.
The change in house prices will likely vary depending on location. The price increase will be more significant in rural areas, where demand is growing as more people move away from big cities. In contrast, property prices in urban areas may grow more slowly, as remote and hybrid work trends are reducing the need for people to live in those locations.
Housing Demand Will Increase in 2025
While regional variations are expected, at Bird & Co we predict that housing demand in 2025 will rise, particularly in areas offering a combination of affordability, amenities, and connectivity. Our rationale is as follows:
- With mortgage rates stabilising or potentially decreasing, homeownership could become more accessible.
- Natural population growth, combined with an increasing number of younger adults seeking independence, is expected to drive demand for housing.
- Government initiatives aimed at supporting first-time buyers (such as the Lifetime ISA) may boost demand further.
Families Will Continue to Leave London in 2025
The migration trend of families with young children out of London will likely continue. The Home Counties will remain an attractive alternative to London, due to housing affordability, access to better schools and, as such, a better quality of life.
Coastal regions may also see increased demand as hybrid work enables relocation to more peaceful and scenic areas.
The Rental Market Will Face Increased Pressure in 2025
Our rental market predictions for 2025 have been greatly influenced by landlords' exits in 2024 due to stringent energy efficiency regulations and rising operational costs.
The reduced availability of rental properties in some areas could lead to higher rents. With rent prices high and mortgage rates declining, buying a home may emerge as the more financially advantageous option. As a result, property transactions are likely to see renewed growth in 2025.
The Construction of Sustainable New Builds Will Increase in 2025
Sustainable new builds have gained significant popularity, not only for their positive environmental impact but also for their higher market value and enhanced energy efficiency, which translates into cost savings for homeowners.
As such, the demand for sustainable housing will grow further, with more developers incorporating energy-efficient features to attract eco-conscious buyers. Retrofitting existing properties with green technology may also become a trend.
AI Will Continue to be Integrated into the Property Sector
Considering how AI adoption in the property sector has expanded in 2024, we foresee its continued expansion in 2025. Advancements in predictive analytics for market trends, personalised property recommendations, and enhanced virtual property tours will become more commonplace.
The continued evolution of AI technology will drive efficiency and transparency in real estate transactions, benefiting both buyers and sellers.
Positive Outlook for the 2025 Property Market
Our property predictions for 2024 were largely accurate. This year, changes in the economic and political climate have affected every facet of the housing market.
Overall, the UK witnessed a decrease in mortgage rates and house prices, and an increase in demand for housing and property transactions. Developments also occurred in the construction of sustainable housing and the use of AI in the property sphere. At the same time, the rental market has faced challenges, and London has seen a decline in its resident population, particularly among families with young children.
As we look ahead to 2025, we anticipate a continued reduction in mortgage rates, which may ignite a slight increase in house prices. We also foresee, once again, an increase in housing demand and transactions.
Nevertheless, the rental market will likely continue to suffer as more landlords are compelled to sell their properties. This is likely to drive an increase in housing transactions as purchasing property becomes a more appealing option.
For individuals planning to buy or sell property in 2025, Bird & Co’s conveyancing services are ready to support you. To speak with a member of our team, please call 01476 372 043, visit our contact page, or request a quote online.