Meanwhile rental prices are expected to outpace the rate of inflation, with increases of 4.5% in 2025 and 4% in 2026 and 2027
A new forecast has suggested that the UK’s average house price is set to rise by 3% in 2025, followed by a further rise of 3.5% in 2026 and 2.7% in 2027. Next year, this would bring the average house price to £300,000, or almost a £10,000 increase on current levels.
Estate agency Hamptons’s near-term forecasts have remained unchanged, but the longer-term view has been downgraded due to high interest rates and the tax environment.
Regionally, London is expected to be the winner in 2025, outperforming other regions for the first time in almost a decade. Hamptons forecast a 4% annual house price growth in London in 2025.
Meanwhile rental prices are expected to outpace the rate of inflation, with increases of 4.5% in 2025 and 4% in 2026 and 2027.
Between now and the end of 2027, Hamptons expects rents to increase by 17.0% across Great Britain, outpacing house price growth of 12.5%.
Rental price growth for 2024 is expected to reach £1,401, with a further rise of £1,464 in 2025 and an increase of £1,523 in 2026.
The housing market has been in focus for the past few weeks as the Labour government delivered its first budget and the BoE’s monetary policy committee reduced its key interest rate to 4.75% on Thursday.
As the end of 2024 approaches, the mood of the housing market has shifted from trepidation to cautious optimism, according to Aneisha Beveridge, head of research at Hamptons. Lower mortgage rates have been the principal catalyst for change, dropping more rapidly than we anticipated.
The average rate on a five-year fixed rate deal at 75% LTV declined from 5.2% in September 2023 to 4.1% in September 2024. Strong income growth has also helped reduce some of the pressures brought about by the cost of living crisis.
Despite this positive trend, the recovery is not uniform across all sectors, said Hamptons. The prime markets have been more cautious due to speculation about budget changes to capital gains, inheritance tax, stamp duty and non-dom status.
