We always find these articles interesting to write and looking back over the past year, it’s been another year of unpredicted changes!
At the end of 2023, our founder Hasan wrote this article that outlined his predictions for 2024 and the place we wanted to start was by looking over how they turned out before looking at what 2025 could bring:
- Rents to rise by 5% - This is an interesting one as the latest ONS data (reflecting the end of November) comments that rents have risen by 9.1% on average for new lets
- House prices to drop by 2% – 4% - The reverse has been true here, with house prices rising by 1.9% as of November.
- Bank of England base rate to start easing by the end of the year (with some predicting another 0.25% or even 0.5% rise in the spring) – Another interesting point here as the best case illustration we could find in December 2023 was rates hitting 4.2% and worst case, hitting 4.7%. It looks like the worst case scenario was fairly precise, with rates sitting at 4.75%!
- Mortgage rates to drop to the mid 4% area by December – We were certainly headed here a few months ago, however from our research rates are closer to around 5%
- A new political climate – Hasan mentioned a possible Government change and it looks like he was right here, with the election in July leading to a Labour government taking the reigns
This brings us to 2025. The first full year of the Labour government, so what does it possibly look like we hear you ask – let’s dive into some of the key headlines!
House prices to rise by 2 – 2.5%
The good news for investors is that house prices are set to continue rising throughout 2025 and we have added a graph published in The Guardian to illustrate this below.
There is some debate about how much prices will increase by, but you will see how it’s likely to be around 2 – 2.5%. For Medway investors, this could mean around £5k - £7k in value added to each house they own.
Mortgage rates to drop to around 4%
This one is very much linked to the Bank of England base rate and so incredibly hard to predict.
Reading around, it looks like predictions are that mortgage rates will drop to around 4% for two and fix year fixes by December, but this of course does depend on how the economy performs.
With stagnant growth over the past few months, this one (along with any predictions on BoE base rates) is pretty much anyone’s guess!
Stamp duty changes to impact buyer activity
This is in relation to the additional stamp duty surcharge on second homes introduced in the budget, where the additional 3% levy was increased to 5%.
The goal here was clearly to help make it easier for those who wish to buy a family home, however the unintended (apparently) consequence is likely to be more constraints on rental stock.
Certainly, this should be viewed by investors as simply ‘a cost of doing business’, but constrained rental stock will simply mean ongoing rent rises as the supply/demand imbalance continues.
Landlords with an existing portfolio will benefit from this in the way of increased rents, however there is certainly a glass ceiling here because affordability will only go so far.
Rents to rise by 4% in the south east
The supply/demand imbalance takes us nicely onto rental rates and Savills predicts that rents in the south east will rise by an average of 4% next year compared to 3.5% for the rest of the UK.
If we look at this over 2024 – 2028, Savills’ prediction is that we will see a 20.4% increase in total over the four year period.
Renters rights bill likely to move forward
We're sure you will know what this one includes by now, but the biggest change is the removal of section 21.
This bill was kicked into the long grass by the Conservative government, however Labour have promised to revive and implement it (with changes).
As of today, the bill is at the report stage, before the third reading that’s due for 14th January. Perhaps 2025 will see this bill pass into law – we shall see!
As you will see from here, 2025 is looking to be a year of increased house prices, higher rents and increased legislation. One point to consider here is how the predicted increase in house prices is likely to pretty much equal the additional stamp duty levy (a point not often considered by property investors).
We don’t doubt that 2025 will, again show itself to be a resilient year and it will be interesting to look back over another 12 months in December 2025 to compare!
