As we step into 2025, it’s worth taking a moment to reflect on the developments of the past year and looking at what this might mean for the year ahead.
Despite a sometimes challenging landscape, the economy fared better than expected in 2024. Lower inflation, which dropped significantly in the first quarter and stabilised near target levels for the remainder of the year, played an important role, encouraging the Bank of England to begin an interest rate-cutting cycle, setting the stage for sustained economic growth in 2025 following 1% growth in 2024. This, paired with price stability, rising real incomes, and declining debt costs creates a more favourable environment, and makes the outlook for the year ahead cautiously optimistic. Mortgage rates are expected to continue to decrease, which could prompt a recovery in housing market activity, including sales volumes and house prices.
A key event in 2024 was the election of a Labour Government, ending 14 years of Conservative leadership. The outcome of the election brought a sense of relief to the market after months of uncertainty. However, some of the measures introduced in the budget will present challenges, particularly the additional National Insurance Contributions effective from April 2025, which will affect businesses.
The government has introduced forward-looking initiatives like the Invest 2035 Strategy, aimed at creating sustainable development, regional growth, and infrastructure investment. Additionally, the updated National Planning Policy Framework (NPPF) will usher in a new ‘grey belt’ classification, while the government’s sustainability agenda is likely to work on implementing MEES ratings for commercial real estate (CRE).
On the residential front, the UK housing market demonstrated resilience in 2024, despite affordability challenges. Nationwide reported a 4.7% increase in house prices over the year, with the average home valued at £269,426 by year-end. While prices remain below their summer 2022 peak, the growth indicates strong underlying demand. Terraced homes saw the fastest appreciation, highlighting the appeal of affordable and versatile housing options.
Additionally, Rightmove reported a record-breaking Boxing Day in 2024, with record levels of site traffic, inquiries, and new property listings. The property portal says the number of new properties coming to the market for sale was 26% higher than Boxing Day 2023, breaking the previous record. The boxing day bounce reflects that both buyers and vendors are eager for change heading into the new year and could act as a bellwether for January trends. Notably, mid-market ‘second stepper’ homes — three- and four-bedroom properties — largely featured in the listings, comprising nearly half of the total. Smaller first-time buyer homes accounted for a third, while larger, high-end properties made up the remainder.
In the boxing day bounce, properties in the South East of England led the way in new listings, followed by the East of England and the South West. However, the real momentum typically builds after January 2nd, as the New Year inspires people to act on their plans to move or sell. Winkworth’s Chief Executive Dominic Agace said, “Our offices always see a spike in people coming to the site in the days after Christmas as new instructions go live after the Christmas break, but the real bounce will be on January 2nd when a desire for change is a natural sentiment in the New Year and many people decide to move and to sell.”
In terms of commercial real estate, the sector faced challenges in 2024, with investment volumes remaining subdued compared to previous years. However, there are encouraging signs that the market has reached the bottom of its cycle, with improved investor sentiment and yields expected to compress in early 2025. As we move through 2025, the combination of economic recovery and evolving market conditions lay foundations for opportunity in the property market.
