Soaring UK property values in danger of reaching country's property price peak
UK Property Market Shows Moderate Growth and Cautious Optimism
The UK property market is currently experiencing a phase of moderate growth, according to industry experts, following the Bank of England's decision to lower interest rates and the subsequent rise in house prices.
In the last year, the number of mortgages agreed has increased by over 40% and is now at its highest level since July 2022. House prices have also seen a consistent month-on-month rise, indicating a potential upward trend for the rest of the year. The average price of a property in the UK reached a record high of £292,507 in June 2022 and, more recently, stood at £292,399 in September 2022.
Despite these positive signs, experts have revised their growth forecasts downwards for the near term. Savills now predicts that average UK house prices will rise by only about 1% in 2025, significantly lower than their earlier estimate of 4% growth. Rightmove’s forecasts are slightly more optimistic, expecting around a 2% increase in average asking prices in 2025, but this is still a revision downward compared to their initial forecasts.
This slowdown in growth can be attributed to a slowdown in buyer activity, despite improving affordability from lower interest rates. Nationwide data shows annual house price growth slowed to about 2.1% in the year to June 2025, down from 4.7% in December 2024. The market experienced a surge in transactions early in the year (partly due to stamp duty changes) but then sharply declined, reflecting buyer uncertainty.
However, longer-term forecasts are more positive. Savills’ model predicts that UK house prices could increase by up to 24.5% by the end of 2029, representing a notable upward revision for five-year growth expectations. This suggests that while short-term growth may be subdued, the market fundamentals and longer-term demand outlook remain supportive of price appreciation.
Other factors influencing the market outlook include rising rents, which may sustain demand for homeownership as a preferable alternative, and economic challenges like rising unemployment and increased business costs that could weigh on buyer confidence.
The commercial real estate market has also shown signs of resilience, with commercial real estate values hitting the bottom and confidence returning. Opportunistic acquisitions of prime properties in prime locations have become more common, indicating a potential recovery in the commercial property sector.
Labour's plans to stimulate the housing sector, particularly concerning the construction of new homes and unlocking the planning system, are causing much anticipation. If effective initiatives are announced by Labour in the coming months, they could provide the market with an additional boost, driving further growth and confidence.
In summary, the UK property market is showing strong signs of resilience despite broader uncertainties. While short-term growth may be subdued, the market fundamentals and longer-term demand outlook remain supportive of price appreciation. The market is entering a phase of moderate growth and cautious optimism, with lower near-term price increases following the Bank of England’s interest rate cuts but stronger price growth expected over the medium term.
- Investors may find the housing market an attractive option for investing, given the moderate growth and cautious optimism it currently shows, as outlined in the UK's property market analysis.
- In the realm of finance, housing market experts have revised their growth forecasts, suggesting that the average UK house price increase could be approximately 1% in 2025, as compared to their initial predictions of 4% growth, due to a slower pace in buyer activity.
