Hi everyone.

I had a conversation with a friend the other day, and they asked me a simple yet loaded question:

"Are house prices going to explode this year?"

It got me thinking… because if you’ve been watching the market, you’ll know it’s not that straightforward.

Some say prices are set to skyrocket. Others predict a crash. And then there’s the middle ground—moderate growth, no fireworks, just steady gains.

So, which is it?

To find the answer, we need to rewind a few years. Back to the pandemic, when borrowing was cheap, demand was through the roof, and prices soared.

Fast forward to today, and we’ve got high interest rates, policy shifts, and an economy that’s not exactly booming.

So, what’s really happening? And more importantly, what should investors be thinking about for 2025 and beyond?

Let’s dive into.

Buy-To-Let Mortgage Rates

OTHER NEWS

1. A significant number will be rushing to complete before the latest changes to Stamp Duty rates at the end of March—yet 74,000 will just miss the deadline.

2. North West property investors have achieved the greatest capital appreciation over the past five years.

3. Renters’ Rights Bill 2025 and its impact on student accommodation.
   

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Will Property Prices Explode This Year? Here’s What the Data Says

Aiming to answer the ultimate question. Are we going to see house prices explode this year?

As an investor, i’m always looking at what are we to expect. A boom? Bust or just somewhere in the middle.

As crazy as it sounds, we may need to go back a few years. All the way to the beginning of the pandemic.

Yep. Since 2022 we got some interesting data that allows us to make an inform decision.

Pandemic Era (2020-2022): High Demand and Low Interest Rates

During the pandemic, the UK property market experienced a remarkable transformation. Initially, the market came to a standstill due to lockdowns, but as restrictions eased, demand surged.

The low interest rates made borrowing cheap, fueling this demand. By the end of 2022, average UK house prices had grown by 20.4%, from £237,895 to £286,515. 

This rapid growth was driven by the ease of borrowing when money was essentially free. Combined with high demand, this further fueled the market.

However, as interest rates began to rise in 2022, the market started to adjust. Higher borrowing costs reduced affordability, leading to a slowdown in price growth.

Despite this, the market remained robust, with certain regions like the North West experiencing significant price increases for flats, up by 23.5% over the same period.

2023: Inflation and Interest Rate Challenges

In 2023, the UK faced high inflation, peaking at over 10%, which impacted the real value of house prices.

Surprisingly, this did not affect the market greatly. House prices remained relatively stable, with some regions experiencing modest declines. The average UK house price decreased by about 1.4% over the year, reaching £285,000 by December 2023. 

This stability was partly due to the resilience of demand in certain regions and the ongoing housing supply shortage.

Rising interest rates continued to affect the market, increasing mortgage costs and reducing affordability.

Over 1.2 million homeowners with tracker or standard variable rate mortgages felt the immediate impact of these rate hikes. However, with 80% of mortgages being fixed-rate, many homeowners were shielded from these increases, at least temporarily.

2024 and Beyond: Labour's Policies and Market Stability

The election of a Labour government in 2024 introduced new policies aimed at increasing housing supply and affordability.

These initiatives include building 1.5 million new homes and adjusting stamp duty thresholds. While these changes might have short-term effects on demand, they are expected to stabilize the market in the long term.

In 2024, despite high interest rates, the UK housing market showed signs of resilience. House prices rose by about 1.1% annually, with notable growth in Northern Ireland and the North West. The market didn’t crash.

But why. Interest rate was at a all time high, labour coming in causing some uncertainty possibly and the economy was doing the best.

If you take a look at the line chart below you can see key peaks between 1988 and 1990 and also between 2001 and 2008, property market were on the rise in comparison to the ‘real house price trend’ shown by the red line.

The bubble was forming and it was only inevitability that prices were going to drop.

The crash.

But take a look at 2024, property prices were way below the ‘real house prices’. Is that why we never saw any crash?

Well, maybe this may rise considerable in 2025 but it’s unlikely.

The trend of increasing house prices is expected to continue, with predictions of a rise of over a fifth by the end of 2028.

2025 Outlook: Stability and Growth

Here we are in 2025, several factors suggest that the UK property market will remain somewhere in the middle……… stable:

1. Moderate Price Growth: Predictions indicate that house prices will grow at an annual rate of 4%-6% throughout 2025. This moderate growth is supported by strong buyer demand and a persistent housing shortage.

2. Increased Supply: The number of homes available for sale has increased by 10% compared to last year, making January 2025 the strongest in seven years. This rise in supply is expected to balance demand and stabilize prices.

3. Economic Confidence: Improving economic conditions and rising consumer confidence are bolstering the market. Despite upcoming stamp duty changes, buyer demand remains high, with 17% of homeowners planning to buy or move within the next two years.

4. Regional Variations: The North West continues to lead in price growth, with areas like Wigan experiencing significant increases. This regional variation highlights opportunities for targeted investments.

My thoughts…….

The UK property market has navigated significant challenges since the pandemic, from surging demand and low interest rates to rising inflation and interest rates.

And we haven’t had a crash during the toughest period since.

As we move into 2025, the market is poised for stability, driven by moderate price growth, increased supply, and economic confidence.

As market is expected to grow on average by 4% this year, I’ll take that all day as a stable return on my investment.

BOTTOM LINE

✅ Pros:

• Moderate Price Growth – House prices are expected to grow by 4%-6% in 2025, making it a stable investment environment.

• Economic Confidence – Improving economic conditions and strong buyer demand are keeping the market resilient.

• Increased Housing Supply – A 10% rise in available homes compared to last year helps balance supply and demand.

⚠️ Cons:

• Higher Mortgage Costs – Interest rates remain elevated, reducing affordability for many buyers.

• Uncertain Policy Impact – Labour’s housing policies, such as new stamp duty adjustments, could create short-term uncertainty.

• Regional Variability – Not all areas will see the same price growth, making location crucial for investors.

TO DO LIST

✅ To Read - Asking price for houses has gone up this month.

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