Real estate investing | The UK property market in 2025 remains underpinned by strong fundamentals. Housing demand has been robust, driven by population growth, household formation and a shortage of new homes. Annual net additions in 2023–24 were only 221,070 dwellings, 6% below the previous year. This is well below government ambitions (300,000+ new homes per year) and independent estimates of need (~340,000 per year). The chronic undersupply has created pent-up demand. Even after a mild price dip in 2023, prices are now rising again, rents are high, and forecasts point to moderate gains ahead. Together, these trends, tight supply, recovering prices, strong rents and supportive policy make 2025 an opportune time for UK property investment.

Real Estate Investing: UK Housing Supply vs Demand

The UK continues to undersupply homes relative to demand. In England, the net additional dwellings in 2023–24 were 221,070, down 6% from the year before. By comparison, the government’s own target is 300,000 new homes a year, and independent analyses suggest even higher demand (around 340,000 per year). This gap, reflected in high occupancy levels and low vacancy rates, keeps upward pressure on prices and rents. It also means any increase in activity (for example, if borrowing costs ease) is likely to push prices higher due to very limited new supply.

Overall, the market remains fundamentally undersupplied. For real estate investing, this means rental occupancy will stay high and homes are likely to appreciate over time as new builds come slowly.

After a mid-cycle pause, UK house price growth has resumed. ONS data showed prices falling modestly in late 2023, but by 2024–25 the trend has turned positive. For example, UK average prices in Dec 2023 were down 1.4% year-on-year, but early 2025 data show gains: ONS reports +3.5% annual growth to April 2025. Major property portals also signal firming markets. Rightmove’s experts predict ~4% house price growth in 2025 as mortgage rates ease. Similarly, Zoopla notes that all regions are back in growth and forecasts +2.5% in 2025 (7.5% over three years).

On the supply side, higher mortgage rates and inflation held prices flat for much of 2023. But rising incomes have already improved affordability – UK wages grew ~15% since 2022 Q2 while prices grew ~1.5% , and this momentum is feeding back into the market. Industry forecasters see modest gains ahead: JLL projects UK prices up ~20% over five years (averaging ~3–4% per annum), and Savills expects +4% in 2025 and +23.4% over five years. Notably, most see growth as strongest outside London. Northern England and Scotland are forecast to outperform, whereas London and the South catch up more slowly.

House price highlights: Price growth is forecast positive in 2025. For example:

  • ONS: –1.4% YoY (Dec 2023) but +3.5% (to Apr 2025).
  • Zoopla: +1.5% (2024) and +2.5% (2025).
  • Rightmove: ~+4% in 2025 (if rates fall).
  • Savills/JLL: ~+3–4% pa through 2025–29 (20–23% total).

These figures suggest the market is returning to normal growth after recent headwinds, making opportune conditions for real estate investing.

Real Estate Investing: Government Policy and Support

The UK government continues to emphasise housing supply and affordability. Targets remain high, “300,000 homes by the mid-2020s” is still government policy, and DLUHC has pledged 1.5 million homes this Parliament. Various schemes (e.g. Help to Buy until Mar 2023, First Homes for first-time buyers) aim to boost owner-occupation. Stamp duty thresholds have also been eased for first buyers in 2025, which can stimulate activity in that segment. As part of its strategy, planning reforms and targeted investment support real estate investing by making it easier to secure planning consent and fund build-to-rent schemes, which in turn increases market confidence for landlords and developers alike.

On the demand side, macro policy (interest rates, fiscal support) is also crucial. The Bank of England is expected to cut rates gradually in 2025, which would improve affordability and buyer confidence. Rightmove’s analysis notes that even a small drop in borrowing costs could generate “stronger 2025” activity and price growth.

At the same time, government planning reforms and infrastructure funding (e.g. levelling-up projects in Manchester, Birmingham, Leeds, Liverpool, etc.) are directed at revitalising regional markets. This should support the strongest growth areas and encourage investment beyond London.

For real estate investing, it is worth noting that policy can create short-term distortions. For example, a mid-2025 change to stamp duty rules caused a one-off 66% plunge in April transactions. Such events can delay deals in the near term but often lead to sharp rebounds.

Real Estate Investing: Growth in Key Regional Cities

London has long led UK housing, but this year the spotlight is shifting to regional cities. Manchester, Birmingham, Leeds, Liverpool (and northern cities generally) are currently recording stronger market activity and growth than the South. For instance, recent Savills forecasts highlight the North West as the strongest region (+30% over five years), whereas London’s growth is forecast ~17%. JLL similarly finds Scotland and the North of England outpacing the South in 2024

Figure: JLL’s 2024 house price forecasts by region. Northern England (blue bars) is expected to see significantly higher growth than London or the South (beige), reflecting stronger fundamentals up North.

These regional trends are underpinned by local economic factors. Cities like Manchester and Birmingham have booming jobs markets and major regeneration schemes. For example, Manchester’s Waterhouse Gardens development (a 556-unit city-centre complex) exemplifies ongoing investment in the north (see our Waterhouse Gardens blog). Likewise, Liverpool and Leeds continue to attract new businesses and younger demographics.

Capital gains and rental yields in these cities are attractive. Zoopla data show strong rental yields outside London, e.g. Manchester ~6.5%, Liverpool ~7.4% gross yield. Leases remain in high demand: recent Savills analysis notes that “house price growth was highest in Scotland” and northern England (e.g. North West) saw 4%+ house price inflation in early 2025, outperforming coastal/southern areas.

Key regional insights for real estate investing:

  • Manchester & Birmingham: strong rental markets (6–7% yields) and sustained price growth (6–7% per year in recent data).
  • Leeds & Liverpool: similarly robust, benefitting from local investment and affordability (Liverpool ~7.4% yield).
  • London/South: growth is more muted by comparison.

Investors who are active in real estate investing often target these regional hotspots for precisely these reasons.

Real Estate Investing: Rental Demand and Yields

The UK rental market is very tight, driving high yields. Tenant demand remains strong nationwide. ONS data show UK private rents up 7.0% (year to May 2025), still running well ahead of general inflation and wage growth. Demand outstrips new rental supply (few new units for rent and many homebuyers turning to renting), so landlords can command higher rents. According to Zoopla, the average gross rental yield in the UK is ~5.6%. Crucially, yields vary widely by area: many northern cities deliver well above 7–8% (e.g. Sunderland, Aberdeen, Burnley top 8%), whereas London is down around 5%.

High yields are a key draw for investors. Manchester city-centre flats can yield 6–7%, Birmingham around 5–6%. Even in London’s outer zones, yields may reach 4–5%. In general, smaller cities and regeneration areas offer the best returns. Importantly, forecasts suggest rental growth will remain positive over the medium term (Savills projects UK rents +17.6% over five years) even as it cools from recent highs. This combination, rising rents and moderate property prices – supports total returns on buy-to-let.

Rental market highlights:

  • Rents +7.0% YoY (UK) per ONS, reflecting ongoing demand.
  • Average UK gross yield ~5.6%; many northern areas exceed 7–8%.
  • Savills forecasts rents rising ~17% in five years, though growth will moderate as affordability limits are reached.

With borrowing costs still high, some tenants delay buying homes, further boosting rental demand. In short, rental demand is robust and yields are strong, making 2025 favourable for buy-to-let.

Real Estate Investing: Capital Appreciation Forecasts

Analysts are fairly united that UK house prices will see modest appreciation from 2025 onward. The consensus is that market corrections of 2022–23 have mostly played out, and that prices will climb steadily thereafter. Zoopla’s forecast predicts a +2.5% rise in 2025 (and +7.5% over three years). Savills expects +4% in 2025 and +23.4% by 2029. JLL’s five-year view is +20% national (∼3.7% annual).

Regional forecasts are even stronger in the north: Savills foresees the North West up ~30% in five years (versus ~17% for London), while JLL highlights that any relief in rates would especially benefit lower-value (northern) markets. The UK-wide view is that housing has some catch-up to do after last year’s cooling, but not the double-digit booms seen in past decades. Instead, analysts project inflation-beating growth, powered by improving affordability. As the Bank Rate is expected to decline, mortgage costs should come down: Bank forecasts suggest base rate cuts from 4.75% toward 3–4% by 2026. This supports price growth prospects.

In summary, most forecasters see mid-single-digit annual price gains in the next few years. Rightmove’s experts capture this, noting that more buyers entering in 2025 could “push house prices up by 4%”. In context, any double-digit crash is unlikely; rather, steady growth as affordability improves. For example, Zoopla reports that the market is no longer overvalued (overvaluation of +8% in early 2024 was erased by rising incomes), so prices now move in line with fundamentals.

Real Estate Investing: Risks and Investor Strategies

No investment is without risk. Key uncertainties for UK property include interest rates, inflation, and policy changes. Inflation has been higher than expected (reaching 3.4% in April 2025), which could delay rate cuts. Higher mortgage costs have already slowed price growth in expensive markets (as JLL notes). If rates stay elevated longer, growth could be weaker than forecast. Fiscal and regulatory changes (like sudden stamp duty shifts) can also cause volatility: for instance, the April 2025 stamp duty cut created a sharp drop in transactions.

From an investor’s perspective, strategies should focus on resilience when real estate investing. This means diversification (mixing locations and property types) and focusing on areas with strong fundamentals (high rental demand, good regeneration). Locking in competitive fixed-rate financing when available can hedge against rate risk. Many experts advise keeping a medium- to long-term horizon: UK housing’s history shows persistent growth over 5–10 years (long-run JLL data show 25-year rises of 20–30% in most cycles).

Notably, the current market adjusted already to higher borrowing costs, Zoopla estimates that rising incomes and falling mortgage rates “removed” the previous overvaluation. So the worst of the rate shock is likely past, and the next phase is consolidation and gradual growth. Rightmove’s analysts emphasise that 2025 could be the year momentum returns, “sets us up for a stronger 2025 in both prices and homes sold, particularly if mortgage rates fall enough”.

Real estate investing risk management tips:

By balancing rental income (yields) and capital growth potential, investors can mitigate some risks and achieve better yields when real estate investing. Given that most forecasts show positive growth, a properly chosen UK property can offer both monthly cash flow and long-term appreciation. While long-term forecasts are positive, prudent real estate investing requires recognising short-term risks such as interest rate volatility and policy shifts. By diversifying across regions and locking in fixed-rate finance, investors can mitigate these headwinds and position their portfolios for steady growth.

Real Estate Investing: Why 2025 Is Strategic for Investment

Putting it all together, 2025 stands out as a strategic moment for UK property investors and real estate investing. After recent uncertainty, the market is in a more balanced state: prices are stabilised (or beginning to rise), interest rates may soon peak or ease, and incomes have grown strongly. As a result, affordability is recovering, a key green light for buyers. Rental markets remain tight, ensuring cash flow, while supply constraints suggest capital gains will resume.

Moreover, all major professional forecasts agree that modest growth is likely. This reduces the risk of loss and increases the chance of profit, especially compared to riskier assets. The combination of still-high yields (5–7% range) and rising prices (2–4% per year) can deliver double-digit total returns.

Finally, UK property offers portfolio diversification. With many traditional markets (bonds, equities) volatile in 2024–25, real estate provides a tangible asset with inflation hedge (rents often keep pace with inflation) and currency stability (GBP is a safe-haven currency).

In short, fundamentals are strong, and many analysts see UK housing as undervalued relative to long-term trends. The year 2025 is likely to reward investors who act now in real estate investing.

For those ready to explore opportunities, contact TKPG to discuss tailored investment strategies. Our team can advise on the best regional markets, financing options, and off-plan deals. With UK property demand rising and forecasts positive, now is the time to position your portfolio for growth in 2025 and beyond through real estate investing. Get in touch today to explore real estate investing.

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