As we move further into 2025, we take a look back at how the UK property market performed last year and what it means for the year ahead.
UK House Prices: Growth Amid Affordability Pressures
According to Nationwide’s December 2024 report, UK house prices ended the year up 4.7% year-on-year (YoY), showing unexpected strength despite affordability concerns.
Key Factors Behind House Price Growth:
- Resilient demand, even though borrowing costs remained high.
- Towards the end of 2024, sentiment improved as mortgage rates began to stabilise.
- Many buyers sought to secure property transactions before the stamp duty changes set to take effect in Q2 2025.
While 2024 saw a gradual recovery in property values, affordability challenges remain a key issue for many buyers.
Prime Central London (PCL): Property Market Adjustment
The Prime Central London (PCL) market had a contrasting experience in 2024, with house prices declining by 1.9% YoY, according to Savills’ Q4 2024 report.
Why Did PCL Prices Fall?
The downturn was largely driven by two major tax policy changes announced in Labour’s first budget:
- The winding down of non-dom tax status, which reduced incentives for international buyers.
- New Stamp Duty Land Tax surcharge on second homes, increasing transaction costs for overseas investors and second-home buyers.
These changes led to weaker demand and price adjustments, particularly at the high end of the market.
Prime Central London Rental Market: Demand Outpacing Supply
Despite declining house prices, the Prime Central London rental market remained resilient, with rents rising by 4.8% YoY in December 2024 (CBRE).
Key Rental Market Trends:
- Rental supply shortages kept prices high, with properties letting quickly.
- 42% of privately owned homes in PCL are now in the private rental sector (Savills).
- Overall rental activity was lower than in 2023, not due to declining demand but because of constrained supply.
This undersupply of rental properties in London has continued to push rental values upwards, despite some landlords exiting the market due to tax and regulatory changes.
Rental Market Trends: A Five-Year Perspective
Savills Research highlights significant rental swings over the past five years, particularly post-pandemic.
Key Insights from Savills’ Five-Year Rental Market Data:
- Peak rental growth occurred in 2022, following a sharp recovery post-pandemic.
- 2023 and 2024 saw a normalisation of rental growth, though demand continued to push rents higher.
- Five-year rental growth by property type:
- 1 bed: +15.9%
- 2 bed: +16.0%
- 3 bed: +16.7%
- 4 bed: +12.9%
- 5 bed: +12.2%
- 6+ beds: +12.2%
While rental prices remain high, the volatility seen in the past five years has largely stabilised, with a more predictable trajectory expected going forward.
To conclude, the UK property market remained resilient in 2024. In 2025, stamp duty changes, mortgage rates and investor sentiment will shape the market. While UK housing remains stable, PCL adjustments and rental market pressures will continue to influence opportunities for buyers and investors.
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