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Key market shifts, including falling interest rates and changes to Stamp Duty thresholds, are set to shape the property landscape in 2025.

Whether you’re looking to buy, sell, or simply stay informed about your property’s potential value over the next 12 months, here are three property market predictions for the year ahead.

1. Stamp Duty changes are likely to drive early-year property transactions

In the Autumn Budget, Chancellor Rachel Reeves confirmed that the temporary higher Stamp Duty thresholds will revert to previous levels in April 2025.

Stamp Duty is a tax on property or land purchases, and the recent higher threshold has allowed many buyers to pay less—or even avoid it altogether. With this threshold set to decrease in April 2025, the first quarter of the year is expected to see a surge in transactions as buyers move quickly to take advantage of the current rates.

Zoopla anticipates a 5% increase in property sales across 2025, reaching 1.15 million transactions.

This rise is expected to be largely driven by buyers keen to complete purchases before the Stamp Duty changes take effect. For sellers, this could create an opportunity, with increased interest in properties and motivated buyers keen to progress transactions swiftly.

2. Interest rates are expected to fall—but more gradually than initially predicted

Following a series of interest rate hikes throughout 2022 and 2023 to curb inflation, the Bank of England (BoE) began reducing rates in 2024 as inflation stabilised. By December 2024, the base rate stood at 4.75%.

Earlier forecasts suggested a steady downward trend in interest rates throughout 2025. However, recent data from the Office for National Statistics (ONS) showed inflation ticked up to 2.6% in the 12 months to November 2024, prompting the BoE to hold rates steady in December.

So, what does this mean for borrowers? The outlook remains positive. While rate cuts may come at a slower pace than initially anticipated, experts still predict reductions in 2025. BoE Governor Andrew Bailey has suggested the central bank could implement up to four rate cuts over the year. If recent patterns continue, with adjustments of 25 basis points at a time, the base rate could fall to 3.75% by year-end—offering potential relief for mortgage holders.

3. Improving economic conditions could fuel house price growth

Falling interest rates would make mortgages more affordable, potentially driving up demand and property prices.

Additionally, robust wage growth is expected to support market momentum. The ONS reported a 5.2% annual increase in employee earnings from August to October 2024. With wage growth now outpacing inflation, more households may feel confident about moving up the property ladder, while first-time buyers could find themselves in a stronger position to secure a mortgage.

Property firm Savills forecasts a 3.5% rise in house prices in 2025, pushing the average property value to £302,500. Furthermore, the outlook beyond 2025 remains strong—between 2024 and 2028, Savills predicts a cumulative 21.6% increase, which could see the average property price reach £346,500 by the end of the period.

With market conditions evolving, staying informed and acting at the right time will be key to making the most of upcoming opportunities.

Sources : https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/november2024; https://moneyweek.com/economy/uk-economy/605427/when-will-interest-rates-go-up; https://www.zoopla.co.uk/press/releases/house-prices-and-sales-volume-expected-to-grow-in-2025-despite-budget/; https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/averageweeklyearningsingreatbritain/december2024; https://www.savills.co.uk/insight-and-opinion/savills-news/359581-0/savills-upgrades-five-year-forecast-for-uk-house-price-growth