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London House Prices Expected to Rise by 2025

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    London Calling: House Prices Poised for Recovery

    According to recent data, 2024 could prove to be the end of house price falls in London.

    Cluttons – a London residential market specialist – has indicated an end to house price drops in the capital city in its latest property forecast for 2024 and 2025.

    Despite some risks to these central forecasts concerning the economic and geopolitical landscapes, Cluttons expects property values to gain traction as interests drop this year, with a 1% rise in average UK prices in 2024 and 4% growth next year.

    They also expect Prime London values to remain unchanged this year, followed by 3.5% growth in 2025 – a much more optimistic outlook than in 2023.

    Let’s dissect this report in detail and see its effect on the UK buy-to-let property market going forward.

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      What Happened to the London Rental Market in 2023?

      Following modest growth in 2020, average house prices across London dipped by -1.1% at the end of 2023.

      With considerable hikes in mortgage rates affecting investor confidence and activity in the Prime London market in 2023, there was a notable drop in transactions.

      According to Cluttons’ Residential Forecast, there was also some confusion in pricing from buyers and sellers alike.

      For the reasonably priced properties, there were many instances of competitive bidding – usually indicative of pent-up market demand.

      Overall, the UK rental market remained strong in 2023 as demand continued to outpace supply, resulting in an average rental growth of 6.3% in October.

      The Prime London market told a different story, with rental growth stagnating in 2022.

      According to the December 2023 Rental Market Report by Zoopla, London saw the slowest annual rental growth in the UK, falling from 17% to 9%.

      Read More: Get the latest information on buy-to-let in London and how to start investing in real estate with our updated market insights!

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      Cluttons London Residential Forecast: What Will Happen to the London Rental Market?

      Cluttons suggests that overseas and cash buyers will be prominent in the London rental market in the future, with dollar-based investors likely to take advantage of the relative weakness of the GBP.

      Sustained cuts to mortgage rates are also expected to underpin demand in 2024, with overseas investors potentially being encouraged to take action before the General Election.

      With the Labour Party pledging to increase Stamp Duty rates for non-residents by a further 2%, this could be an incentivising factor to get involved before any potentially new legalisations take effect.

      As mentioned, this forecast predicts that London values will remain unchanged this year, with prices expected to gain momentum in 2025 and rise by 3.5%.

      According to the report, this analysis is informed by increased optimism surrounding the UK housing market following the Bank of England’s decision to halt interest rate rises in Summer 2023 and the subsequent drop in mortgage rates from lenders. Why not read about how to make money from Property? with our free guide.

      Cluttons also anticipates thriving activity in the central London rental market, where demand is still outpacing supply. However, they also expect rental increases to slow to 2.5% in 2024 – down from double-digit growth in 2022.

      Gráinne Gilmore, Director of Research & Insight at Cluttons, said: “The economic and political landscape includes much uncertainty as we move into 2024, both globally and domestically. A UK General Election at some point this year will create uncertainty in the months leading up to the vote.

      “Yet it also provides an impetus for policymakers to implement or promise policy changes that could help more first-time buyers onto the ladder, to streamline property taxes and to overhaul the planning system to help get more homes built, all of which could provide a fillip to the market.

      “However, any intensification of the crisis in the Red Sea could contribute to rising inflation as the cost of delivering goods increases, which would, in turn, affect sentiment if the Bank of England can’t cut rates as quickly as expected. Likewise, any sudden rise in unemployment would act as a brake on the housing market.”

      Further Reading: For more information, take a look at our UK interest rates chart and our guide to London rental yields.

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        Should You Invest in London Property in 2024?

        While certain London investment properties can offer high returns, there is less affordability and capital appreciation potential compared to other regions in the UK.

        Areas like the North West – specifically Liverpool and Manchester – are known to outperform London in terms of capital growth, affordability, and rental yields.

        Discover more about the wider UK rental market with some of our helpful buy-to-let guides:

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        Reece Pape

        Reece Pape is a property writer at RWinvest. Reece is passionate about keeping property investors updated on must-have information and housing market news, utilising the latest property market statistics and data.

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