Why UK house prices keep rising (it's not what you think)

Hi there,

This is Chubby Wallet. We deliver property news, guaranteed fresh, in 5 mins or less every week.

Here's what we’ve got for you today..

• ✍ House price growth to fall in 2025

• ✍ The state of the rental market

• ✍ BTL Hotspots in the North of England

• 📊 The real reason UK house prices keep rising

Let’s dive in

🏠 UK House Prices: A Slower Climb in 2025?

The UK housing market has definitely seen its ups and downs, and 2025 looks set to continue that trend—albeit at a more relaxed pace.

Both Zoopla and Knight Frank, predict house prices will grow by just 2.5% next year, down from current levels of 3.9% annual growth (Halifax) and 2.9% (ONS).

So, what’s causing this slowdown, and what does it mean for buyers and investors?

📉 Why the Market May Cool

There are two key factors at work: rising mortgage rates and the return of pre-2022 stamp duty thresholds.

• Higher Mortgage Rates:
  Mortgage rates have been climbing higher recently, with figures showing average two and five-year fixed rates pushing past 4%..

• Stamp Duty Returns to Pre-2022 Levels:
  Come April 2025, stamp duty thresholds in will revert to previous levels. Homes priced between £125,000 and £250,000, which were exempt, will now incur costs.

  For example, a £300,000 home will see its stamp duty double from £2,500 to £5,000.

  First-time buyers, too, will feel the pinch. The current threshold of £425,000 for no stamp duty will drop back to £300,000, leaving many facing unexpected tax bills.

📈 Long-Term Optimism

Over the next five years, Knight Frank projects cumulative growth of 19.3%, and Savills is slightly more optimistic at 23.4%.

For investors with a long-term view, this slowdown might represent an opportunity rather than a setback.

🏡 What’s Next for the Rental Market?

If you’ve been following the rental market, you’ll know the story by heart: Too many renters, not enough homes.

As we approach 2025, this story is taking some unexpected turn. Let’s explore what’s happening, why, and what it means for renters, landlords, and everyone in between.

📈 The Supply-Demand Tug-of-War

Rental demand, while slightly cooler than the frenzy of 2021-2022, is still historically high.

According to Savills, there are 16% fewer rental properties on the market than in 2018-2019, and homes are being snapped up 20% faster​

Unsurprisingly, rents are still climbing, with national growth projected at 4% in 2025.

But affordability is still an issue though.. e.g In London, where renters are already spending 43% of their income on housing, rent growth has slowed to just 1.7% over the past year.

For many Londoners, the maths simply doesn’t add up anymore.

🚦Beyond the M25 - Rents still Rising

The rental market outside London (defined as outside the M25) is still experiencing growth, people here are spending 33% of their income on rent—higher than the historical average of 28-31%, but not yet a breaking point.

This means rents outside London are likely to keep rising faster than incomes, at least for now.

However, change could be on the horizon. Net migration is projected to fall significantly by 2028, easing some demand pressures and improving affordability for renters

🤔 Landlords: Stay or Go?

A survey by the NRLA, shows that many landlords are eyeing the exit.

Rising costs, stricter regulations, and the looming Renter’s Rights Bill (ending of Section 21 ‘no fault’ evictions, the abolition of fixed term tenancies, and a move to once a year rental increases) are making the private rental market less attractive.

Another key piece of legislation is the requirement for Landlords to upgrade properties to meet new EPC (Energy Performance Certificate) standards 

This  doesn’t make financial sense for the majority of Landlords — especially when the cost of improvements could exceed a year’s rental income.

As a result, this could shrink rental supply even further, reigniting rapid rent hikes despite affordability constraints.

The Northern Buy to Let Market: What’s Driving the Shift?

The North of England has quietly emerged as the UK's buy-to-let hotspot, offering a mix of affordability, high demand, and robust rental yields.

While the south east, including London, remains iconic for property investment, landlords are increasingly looking to the North to maximize their returns.

So, what’s behind this trend, and is it a game-changer or just a temporary shift?

🏠 Why Landlords Are Moving North

• Affordability Meets Opportunity
  Properties in the North are significantly cheaper than their southern counterparts.

  For instance, the average home price in Greater London is £739,166, with a stamp duty bill of £46,633...

  In contrast, a home in the North East averages £186,520, with a modest stamp duty of £5,595.

• Strong Rental Yields
  The North East leads the UK with rental yields of 8.13%, according to Paragon Bank followed closely by the North West at 7.84%.

  Yorkshire & Humber isn’t far behind at 7.54%.

  Compared to London’s modest 5.56%, these yields highlight why landlords are shifting their portfolios northward.

• High Demand for Rentals
  Tenant demand is booming. In the North West, 81% of landlords report strong demand for rental properties, driven by factors like thriving industries, renowned universities, and the flexibility the private rented sector offers transient workforces and students.

🏙️ Northern Renaissance: Cities on the Rise

Cities like Manchester, Leeds, and Newcastle are not just industrial powerhouses but also cultural and educational hubs.

They offer the perfect mix of job opportunities, vibrant communities, and affordability, making them magnets for renters and investors alike.

🤔 Our Takeaway

For seasoned investors, the North offers opportunities to diversify portfolios and achieve higher yields.

First-time landlords might find the affordability of northern markets an ideal entry point.

Investors must do their homework before embarking on this strategy. Understanding micro markets, tenant demographics, and long-term economic trends will be crucial for success.

The Real Reason Behind Rising House Prices

In the ongoing debate about the UK's housing crisis, two explanations dominate the headlines - immigration driving up demand, or a chronic lack of housing supply.

But what if neither of these explanations fully holds water? What if the housing crisis is being driven by something far more fundamental and overlooked?

🏡 The Traditional View: Supply vs. Demand

The standard narrative goes like this:

• Immigration brings in more people, increasing competition for a finite number of homes.

• Supply shortages mean we’re not building enough houses, amplifying the imbalance between demand and availability.

Both points have merit—but only up to a point. Yes, population growth impacts housing demand, and yes, the UK has struggled to hit its housing targets.

But the data shows that since 2000, the number of homes in the UK has grown faster than the population. And yet, average house prices have quadrupled!

If supply was the issue, shouldn’t more homes per capita result in lower prices? Clearly, there’s something else at play.

💰 The Missing Link: Money, Not Bricks

Our take is that house prices haven’t risen because there aren’t enough houses—they’ve risen because of how much money is in the system.

Since 2000:

• The amount of GBP in circulation has quadrupled.

• House prices, land prices, and even luxury assets like fine art, wine, and rare whiskey have quadrupled.

• Meanwhile, the average salary has only doubled.

When viewed as a percentage of the total money supply, house prices haven’t really “risen” at all.

Imagine that In 2000, you earned £10 and wanted to buy something worth £10. You could buy it, no problem.

Fast forward to today…. That same item is now worth £40 because there’s so much more money in the system.

But your salary only went up to £20. This means that even though house prices and other asset classes have gone up, they haven’t really “increased in value.” It’s just that money is worth less now, and salaries haven't kept up with this change.

🤔 What Does This Mean for the Housing Crisis?

The reality is even if immigration was cut to zero tomorrow, or the government built 300,000 homes a year (a lofty target), house prices wouldn’t drop…

At best, they’d rise more slowly. Why? Because as long as wages lag behind the broader expansion of money in the economy, home ownership will continue to feel out of reach.

🎯 Rethinking the Debate

The conversation on housing should not just be about building more homes or controlling demand; it’s about addressing the systemic issues in how wealth and income are distributed.

Tycoon Time

Today’s tycoon is Scott Everett. Scott's journey in real estate is a testament to early ambition and exponential growth.

At 18, he was a high school dropout and teenage father on food stamps… Four years later, he founded S2 Capital to acquire value-add multifamily real estate.

Within 8 years, Scott had grown S2 Capital to an impressive 38,000 multifamily units and he's transacted on $10 billion of multifamily assets, managing over 45,000 units with more than 600 employees across four operating companies.

Scott's achievements have earned him recognition, including the Inc. Magazine 30 under 30 award and Ernst and Young Entrepreneur of the Year for the 2018 Southwest region at age 30.

Scott’s success teaches us three key strategies for property investors and enthusiasts:

• Find your niche. Focus on underserved markets like Scott did with workforce housing. Whether it’s affordable rentals or remote-worker-friendly properties, owning a niche gives you a competitive edge.

• Streamline your operations. You don’t need full vertical integration, but controlling key aspects—like property management—can cut costs and improve efficiency.

• Use data to your advantage. Leverage tools like property analytics or simple dashboards to track performance and spot trends, helping you stay ahead in any market.

THAT’S A WRAP

That's it for this week folks. Each week we’ll cover strategies, updates and insights to help you succeed in real estate. We love this stuff! 

If you Have questions or just want to chat, We want to hear it. 

See you next time in your inbox!

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