After a turbulent few years, the economic landscape is showing signs of stabilisation for the UK housing market. With two base rate cuts, Labour’s victory in the General Election and the Autumn Budget, these changes are set to heavily impact the property market moving forward.
Experts have predicted that this could be a strong year for the buyers’ market – from examining recent trends, legislations and the economic landscape, it is possible to forecast what buyers can expect from the property market in 2025.
Impact of Stamp Duty changes
Effective from 1st April 2025, Stamp Duty rates will rise, increasing purchasing costs for some buyers as a result. This impending change will influence buyer behaviour and encourage purchases before the deadline. Evidently, there will be a notable surge of transactions in March, just before the cut-off.
First-time buyers in the North East will benefit the most from the Stamp Duty change, as this area will see a higher percentage of homes qualifying for Stamp Duty exemptions. However, in London, only 8% of all homes will meet the exemption criteria. The rise in Stamp Duty is likely to influence the market for the rest of the year, as activity is expected to slow for 3-6 months after the initial rush.
House price predictions
Despite affordability challenges, such as the cost of living crisis, 2024 proved to be a fairly resilient year for the housing market. However, the upcoming changes to Stamp Duty are expected to cause uncertainty in the market, therefore enticing more buyers to complete any purchases within the first few months of the year.
Nationwide predict that house prices will increase by 2-4%, however, despite this forecasted inflation, affordability will improve slightly once the market steadies, due to lower interest rates. As interest rates diminish, wages are expected to increase faster than house prices, improving overall affordability.
2025 is set to be a buyers’ market as there will be a wider choice of homes for sale, as well as a longer average time to sell, meaning that homebuyers will continue to have the upper hand.
Surge of downsizing
Fuelled by economic shifts such as the change in Stamp Duty and mortgage rates, 2025 will see an increase in the downsizing trend as more and more homeowners opt for smaller and more manageable properties.
The knock-on effect of the cost of living crisis has meant that many families are working with smaller budgets, and downsizing allows homeowners to reduce costs whilst improving their financial security. This is due to lower mortgages and property tax, as well as less money spent on utilities.
This rise in downsizing is also reflected through the growing self storage market. Those looking to downsize are turning to storage units for an organised and stress-free process, with research revealing that 62% of first time-buyers plan to utilise self storage to aid the moving process once they have found their dream home.
Slight drop in mortgage rates
The Bank of England is expected to make four base rate cuts which will drive reductions in mortgage rates. The average mortgage rates are expected to fall around 4% compared to the current average of 4.83% (for a 5-year fixed rate) – a slight drop, but not a drastic low.
This reduction in mortgage rates is expected to boost buyer confidence and affordability, although 2025 won’t see the ultra-low levels as seen in the past. It’s possible the initial fall will be insignificant, mainly due to the economic uncertainty stemmed from last year’s Autumn Budget and the US Election.
Once these legislations have made a clearer impact, rates are more likely to see further reductions. While it’s nothing ground-breaking, it is still a decrease from what we’ve seen recently.
Final thoughts
The UK property market has been incredibly tough in recent years – especially for first-time buyers – with volatile mortgage rates, high house prices and an ongoing cost of living crisis.
However, despite changing dynamics, the UK housing market presents great opportunities, particularly for buyers and sellers in certain regions. With this in mind, anyone looking to buy or sell should make note of any upcoming shifts that may impact affordability. Having a clear understanding of the market will aid consumers in making informed financial decisions as economic uncertainty persists.
Author: Mehran Charania, Director of Ready Steady Store
Established in 2005, Ready Steady Store is one of the fastest growing self storage providers in the UK, with cost-effective storage units located in the Midlands, South, North and East of England.