As we look ahead to 2025 for property investment opportunity, the mainstream residential property market is emerging as the most promising sector for investors and homebuyers seeking strong returns. Despite a challenging economic backdrop, key market dynamics are creating favourable conditions for property investments, particularly in regions where demand continues to outpace supply.
Stamp Duty Changes Driving Near-Term Activity
Buyers and investors have until the end of March 2025 to complete purchases before stamp duty thresholds revert to previous levels. While the surcharge for additional properties has increased to 5%, this is unlikely to deter activity. The strong fundamentals of the UK housing market, supported by limited supply and robust demand, are expected to sustain momentum.
Rental Yields and Regional Growth
In the rental market, constrained supply and surging tenant demand have driven record-high yields for landlords. This trend is especially pronounced in the north of England, where rental yields consistently outpace those in the south.
Northern regions are also leading the way in property price growth. The North West and North East remain hotspots for investors, with forecasts indicating continued price appreciation. With the government prioritising housebuilding and unlocking planning barriers, particularly in northern towns and cities, the stage is set for increased development opportunities and further property investment potential.
Market Dynamics and Affordability
Higher mortgage costs have impacted affordability for some buyers, but the outlook is improving. Mortgage rates have eased throughout 2024, and analysts anticipate further reductions as the Bank of England lowers interest rates in 2025. Cheaper borrowing will likely spur competition in the mortgage market, making it easier for investors and homebuyers to secure financing.
House Price Predictions
Savills’ latest market forecasts reveal promising growth in mainstream markets. Over the next five years, UK house prices are predicted to rise by 23.4%, with a 4% increase expected in 2024 alone. By contrast, the prime sector is expected to grow more modestly, with an 18.2% cumulative rise over five years and a 2% increase in 2025.
Interestingly, London’s mainstream market is projected to see a 17.1% increase by 2029, while prime Central London is forecast to lag significantly, with just 9.6% growth over the same period. Factors such as higher stamp duty for additional properties, non-dom taxation changes, and revised VAT rules on school fees are redirecting investment activity towards lower-priced markets.
Construction Sector Implications
For the construction industry, these trends present opportunities to meet increasing demand for both housing and rental properties. With the government’s commitment to accelerating housebuilding and regional development, particularly in the north, construction firms stand to benefit from a pipeline of new projects.
At Exance, we are dedicated to supporting the construction sector with tailored insurance solutions that enable businesses to capitalise on these opportunities while managing risk effectively. As the housing market evolves, our expertise ensures that developers and investors alike are well-positioned for success.
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