10 Trends That Will Define UK Property in 2025

Hi. This is Chubby Wallet. The newsletter packed with everything you might’ve missed in UK property this week.

Here's what we’ve got for you today..

• ✍ General outlook for UK property in 2025

• ✍ How inflation will shape the UK housing market next year

• 📊 UK commercial property is poised for transformation

• ✍ 10 Expert predictions for 2025

Let’s dive in

🏠UK Housing Market Recovery Faces Uncertain 2025 Outlook

The UK housing market began its recovery in 2024, but whether this momentum can last is far from guaranteed.

Savills, a leading property agency, has flagged several factors that could make 2025 a make-or-break year.

From fluctuating interest rates to policy changes, the path forward looks anything but straightforward.

📉 The Role of Interest Rates

According to Savills, the recovery hinges on continued reductions in interest rates. As inflation hovers above the Bank of England's 2% target, all eyes are on how quickly—and by how much—the base rate will be cut.

Lower borrowing costs could entice more buyers back into the market, particularly second and third-time homeowners.

But lending appetite among banks will depend on broader economic stability..

Without significant rate cuts, the recovery risks stalling, as buyers hesitate and lenders tighten their criteria.

🤔What’s Driving Buyer Behaviour?

Savills predicts an uptick in the range and purchasing power of buyers over the next five years.

However, surcharges and regulatory hurdles for private buy-to-let investors will likely cap activity in that segment.

For residential sales, the agency forecasts overall price growth of 20% to 25% through 2029, with a modest 4% increase expected in 2025.

Key drivers include:

• Family Homes Near Outstanding Schools: Demand is set to surge in "educational super towns" such as Whitchurch and Newcastle upon Tyne as families seek affordable, quality schooling options. This could be amplified by anticipated VAT on private school fees, pushing affluent families toward top-rated state schools.

• Multifamily Developments in Core Cities: The private rental sector (PRS) in cities like Manchester, Birmingham and Leeds remains a magnet for institutional investors, buoyed by lower debt costs and renewed government support.

• Strategic Development Sites: Mid-sized development projects (100–250 units) in regions with ambitious housing targets..Potential projects in cities like Nottingham, Oxford and Cambridge could become hot commodities as developers rebuild pipelines post-2025.

Challenges on the Horizon

The start of 2025 brings its own hurdles. Consumer confidence will likely be fragile, compounded by the recent Budget, which introduced higher employer national insurance rates and tax hikes targeting the private sector.

These measures aim to boost public funding but risk denting business optimism and household spending.

The reversion of stamp duty thresholds in April 2025 also adds complexity and may temporarily inflate demand before a sharp slowdown.

Currently, buyers pay no stamp duty on the first £250,000, while first-time buyers benefit up to £425,000. After April 2025, these thresholds will drop to £125,000 and £300,000, respectively.

For example, a £300,000 home will see stamp duty rise from £2,500 to £5,000. Additionally, buy-to-let investors will face a surcharge increase from 3% to 5% starting in October 2024.

As buyers rush to secure properties before these changes take effect, the market may experience a brief surge followed by a potential cool-down.

A Long-Term View

The market’s trajectory hinges on adaptability. Tax changes, global political shifts, and economic uncertainties will shape 2025, but Savills and other experts remain cautiously optimistic about the long-term outlook.

Whether you're a buyer, seller, or investor, staying informed and flexible will be critical as the market evolves

📈Inflation’s Back! What’s Going On?

The latest inflation report shows prices are creeping up again. Inflation rose to 2.7% from 2.3% in October, and the core inflation rate (which excludes volatile stuff like food and energy) is at 3.8%.

That’s not great news if you’ve been hoping prices will settle. The Bank of England (BoE) recently cut interest rates to 4.75%, but this new data might make them rethink further cuts.

So, what’s causing all this?

• Energy Costs: Your gas bill might sting this winter. The energy price cap was lifted, and global supply issues are nudging prices up again.

• Sticky Services Costs: Prices for things like eating out and transport are still climbing, which keeps inflation hanging around.

• Labour’s Spending Plans: Labour’s budget aims to grow the economy, but the extra spending could push prices up in the short term.

Will the BoE Keep Cutting Interest Rates?

The Bank of England (BoE) faces a tricky balancing act. While recent commentary suggests we could see interest rates drop to 3.75% by the end of 2025, inflation pressures could force the BoE to move cautiously.

The OECD’s recent forecast complicates things. It highlights stronger UK growth in 2025, bolstered by government spending, but warns of higher inflation—an average of 2.7% that year, topping the G7 charts.

Housing rents in the UK have risen faster than in many OECD countries, adding pressure to an already stretched housing market.

How Does This Impact Property and Mortgages?

• Mortgage Rates: With inflation staying stubbornly above target, the BoE might hesitate to lower rates aggressively. This could delay improvements in fixed-rate mortgage deals for buyers and homeowners looking to remortgage.

• First-Time Buyers: Higher rents mean saving for deposits becomes even tougher, and with wage growth driving inflation, affordability issues remain a major barrier.

• Investors: Rising rents may boost rental yields, but the cost of borrowing and government tax policies could dampen enthusiasm, especially for smaller landlords.

A Short-Term Boost, But at What Cost?

The OECD predicts that by 2026, growth could slow as increased taxes weigh on consumption and crowd out business investment.

For the property market, this means 2025 could be a year of opportunity as borrowing costs potentially ease slightly, but the risks tied to inflation and fiscal sustainability could make long-term decisions more challenging.

And for Buy-to-Let Landlords, higher rents could mean better yields, but Labour’s tax reforms and stricter rules could make things tougher for small landlords.

Institutional players might double down on rental developments as borrowing gets cheaper. Multifamily housing (think build-to-rent projects) is looking like a smart bet.

What’s Next for Buyers?

Keep an eye on rates, but don’t wait too long if you find a good deal—competition could pick up once rates drop.

For Investors: Look at properties with strong rental demand, especially in urban centres.

Stay updated on tax changes to avoid nasty surprises

🏠UK Commercial Property: Poised for Transformation in 2025?

The UK commercial property market is standing at a crossroads, balancing cautious optimism with lingering challenges.

As we approach 2025, insights from RICS, Colliers, and industry leaders highlight opportunities for property investors in an evolving landscape shaped by ESG priorities and strategic investments.

Key Themes Driving the Market

Colliers forecasts up to £50 billion in investment and 11% returns for commercial property in 2025. This optimism stems from anticipated interest rate cuts, likely reaching 3.75% by year-end, improving borrowing conditions and spurring transactional activity.

Investors should look for value-add opportunities like sustainable refurbishments and higher-yielding assets, as traditional prime investments face tighter competition.

Demand for ESG-compliant spaces and flexible leases is growing, especially in regional office markets like Leeds, where Grade A rents could exceed £45 per sq. ft. With companies now expecting workers to be present for a minimum of 3 days per week, investing in office spaces with enhanced offerings, superior fit outs and improved amenities will achieve above average returns. 

In retail, despite challenges, prime spaces are seeing heightened demand, with rental growth supported by foot traffic in leisure-driven locations. We predict that institutional investment will ramp up in prime sustainable properties and locations with high occupier demand to secure long-term tenants and stable yields.

Challenges with Distressed Sales

The RICS monitor highlights an increase in distressed sales across retail (64%), offices (48%), and leisure (38%) due to rising mortgage costs.

This trend underscores risks but also presents opportunities to acquire assets at discounted prices. Investors should identify distressed properties in sectors primed for recovery (such as offices) to maximize returns.

Emerging Opportunities

Despite slowing speculative development, demand for prime industrial locations remains robust. Rental growth is projected between 3.5% and 5.5%, supported by constrained supply.

This trend is supported by CBRE’s outlook which indicate that prime rental growth is evident in several regions This demand is driven by the EV industry, supermarkets, 3PL operators and ecommerce companies like Amazon.

For investors, the key takeaway is to focus on high-demand logistics hubs and leverage the potential for upward rental reviews, as the market continues to favour prime assets in strategic locations.

Alternative Sectors

UK operational real estate in healthcare and leisure sectors offers solid investment returns. e.g. demand for care homes is rising, with the 80+ population expected to exceed 4.5 million by 2032, necessitating 14,400 new beds annually. A 7.4% increase in NHS-funded nursing care rates for 2024-2025 supports this growth.

In leisure, shopping centres are stabilizing, with vacancy rates at 14.0% and prime locations like Westfield London seeing retail growth. Investors should target high-quality care homes and prime shopping centres for investment grade returns.

Final Thoughts

2025 promises to be a transformative year for UK commercial property, driven by seismic shifts in investor priorities and occupier needs.

For investors willing to adapt to trends like ESG compliance, flexible leasing models, and distressed opportunities, the rewards could be substantial..

🏡 The Property Market Outlook for 2025: Expert Predictions

The past year has brought significant political, economic, and market shifts. But what lies ahead for 2025?

We’ve gathered insights from property experts to help you navigate the upcoming changes in the housing market

Dampened Growth but Optimism Ahead – (Aneisha Beveridge, Hamptons International )

• Falling mortgage rates and steady wage growth will fuel modest house price increases.

• Persistent high-interest rates and sluggish economic growth will temper long-term price performance.

• London’s property market is poised to outperform other regions as a new growth cycle begins.

Stability and Balanced Growth – (Nick Leeming, Jackson-Stops)

• A more stable political landscape and reduced uncertainty are expected to create a balanced market.

• Buyers and sellers will gain confidence, leading to smoother transactions.

A Healthy Market on the Horizon – (Kate Faulkner OBE, Property Analyst)

• Strong wage growth, cooling inflation, and easing interest rates will lay the foundation for a healthy property market.

• Transaction volumes could return to the 1.2 million yearly norm, provided no new economic shocks arise.

Ambitious House Building Targets – (Colin Brown, Carter Jonas)

• While the Government’s ambitious target for new homes by 2030 is unlikely to be met, the pace of housebuilding is expected to accelerate in 2025.

• Clarity on boosting housing delivery will be critical.

Falling Base Rates Bring Relief – (Henry Knight, Springtide Capital)

• The base rate is forecasted to decline to 3.5%, leading to lower mortgage rates.

• Buyers should consider securing mortgage offers now to act swiftly as the market shifts.

A Year of Change for Lettings – (Heidi Shackell, The Lettings Hub)

• The Renters’ Rights Bill will reshape the lettings sector, presenting challenges and opportunities for landlords and agents.

• Rising rents and demand for rental homes will persist, with a growing reliance on tech solutions.

• Welcoming tenants with pets could help reduce void periods and encourage long-term tenancies.

Price-Sensitive Buyers Lead the Market – (Richard Donnell, Zoopla)

• Buyers will remain cautious amid economic uncertainty and affordability constraints.

• House prices are forecasted to rise by 2.5% in 2025, with 1.15 million housing transactions expected.

Competitive Pricing Drives Sales – (Tim Bannister, Rightmove)

• Asking prices are predicted to rise by 4%, reflecting improved market conditions.

• Sellers must price competitively to attract buyers.

Stamp Duty Spurs Early Activity – (Tim Foreman, Leaders Romans Group)

• A busy first quarter is expected as buyers rush to beat Stamp Duty increases in April.

• Further interest rate drops during the year will provide additional support to the market.

Resilience Amid Regulatory Overhaul – (Tom Goodman Vouch)

• Landlords and agents will adapt to new regulations like the Renters’ Rights Bill and changes to EPC requirements.

• Demand for rentals will remain high, driving continued growth in rents and investment returns.

Here’s to 2025

That's a wrap on 2024. For the new year, lower mortgage and base rates are set to ease affordability pressures, driving modest price growth and increased transactions.

Despite ongoing economic uncertainty and regulatory changes, the market will show resilience.

Competitive pricing, proactive strategies and Tech/AI driven solutions will be essential for navigating the evolving landscape, with the Renters' Rights Bill and EPC updates reshaping market dynamics.

Tycoon Time

This week, let’s dive into the rise and unravelling of René Benko’s Signa empire. René Benko's rise in the real estate industry is a compelling story of ambition, strategic acumen and downfall

Starting as an assistant to a project developer at just 17, he founded Immofina Holding at 22, which evolved into Signa Holding, a major player in European real estate. He started by converting attics into luxury apartments in Innsbruck and Vienna, a venture that proved highly profitable.

This initial success allowed him to make his first million schillings by the age of 20 From there, Benko's portfolio expanded rapidly, acquiring prestigious assets like the KaDeWe in Berlin, the Chrysler Building in New York, and the Golden Quarter in Vienna.

Key to René Benko's success was his ability to build strategic networks and his deep market understanding. In a candid interview, Benko himself highlighted three key prerequisites for successful investing: ample time, entrepreneurial intuition, and meticulously cultivating professional networks.

Investors can learn from this by taking time to understand market dynamics, develop relationships with industry professionals, and approach real estate not just as a financial transaction, but as a strategic endeavour. 

However, Benko's empire now faces significant challenges, serving as a cautionary tale. The collapse of Signa Holding highlights the dangers of over-leveraging and aggressive growth amid changing market conditions.

As interest rates went up and property values declined, the vulnerabilities of Benko’s highly leveraged model have become apparent. Investors should remember that while investing in prime locations is essential for property success, maintaining robust cash flows and a balanced debt structure is equally crucial.

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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