In a surprising twist that has caught both homeowners and investors off guard, leading UK real estate analysts have made a dramatic U-turn on their 2025 housing market predictions. Where industry insiders once projected a continued decline in property values driven by economic uncertainty, rising interest rates, and waning buyer confidence, they’re now forecasting modest growth—thanks to stabilizing market dynamics and improved economic indicators.
This reversal, led by prominent firms like Savills, marks a significant shift in sentiment and suggests that the market may not just be surviving—but showing signs of a quiet resurgence. Analysts now expect a 2.5% to 4% rise in average UK house prices in 2025, a sharp contrast to previous estimates predicting a dip of 3% or more.
What triggered this newfound optimism? A complex mix of falling mortgage rates, persistent buyer demand, a rebound in property listings, and stronger-than-expected economic resilience is fueling this change in perspective. As the UK economy begins to steady after years of turbulence, real estate experts now believe the property market could not only recover faster than anticipated—but lay the foundation for robust long-term growth.
This comprehensive update sheds light on what’s driving the market’s rebound, who stands to benefit, and what it all means for buyers, sellers, and investors.
From Decline to Growth: The Forecast Flip
Earlier in 2024, most UK housing market forecasts painted a gloomy picture. Amid rising interest rates, cost-of-living pressures, and buyer hesitation, analysts predicted house prices would drop by 2%–3% nationally—if not more in certain overheated areas like London. But those projections have now been revised, and the mood among experts has changed dramatically.
Savills, one of the UK’s most respected property consultancies, made headlines when it updated its 2025 forecast in May. The firm now projects a 4% increase in UK house prices by the end of 2025. More significantly, Savills anticipates cumulative growth of 21.6% across the national housing market between 2025 and 2029—an outlook that is causing many stakeholders to reassess their strategies.
The shift isn’t just about numbers—it reflects a fundamental recalibration of the market. Fears of a post-pandemic property crash have given way to cautious optimism, supported by improved consumer confidence and more favorable lending conditions.
For anyone on the fence about buying or selling in 2025, this pivot in expert opinion could be the signal they’ve been waiting for.
What’s Driving the Change in Outlook?
So, what exactly flipped the script for housing market analysts?
The most significant driver is the easing of mortgage rates. With the Bank of England reducing its base rate to 4.25% in early 2025, lenders responded by lowering their mortgage rates. This move has made borrowing more affordable again, drawing buyers back into the market and increasing competition for quality properties.
Another key factor is buyer resilience. Despite economic challenges, demand for housing has remained surprisingly robust, especially among first-time buyers and those looking to upgrade. Many have decided not to wait for the “perfect market” and are instead capitalizing on slightly softer prices and better financing options.
The broader UK economy has also stabilized more quickly than expected. Inflation, while still above target at 3.5% as of April 2025, has cooled significantly from the highs of 2023 and 2024. With consumer spending on the rise and employment levels remaining strong, confidence in the housing sector is building.
Lastly, the government’s support for housing initiatives and new home construction has helped increase supply in certain regions, creating a healthier balance between demand and availability.
These combined factors have shifted the narrative—from impending collapse to steady, sustainable growth.
Savills’ New Forecast Explained
Savills’ revised housing market forecast is perhaps the most detailed and influential among the updated projections. Initially, the firm predicted a 3% drop in average UK house prices in 2024, followed by stagnation in 2025. But by mid-2024, improved economic indicators prompted a re-evaluation.
The new outlook anticipates a 2.5%–4% rise in average home prices during 2025, with further gains forecast through 2029. Over the five-year horizon, Savills expects a 21.6% cumulative increase in UK house prices, assuming continued economic stability and low-interest rates.
Growth is expected to be most prominent in regional cities outside London, where affordability remains better and demand is high. Northern hubs like Manchester, Leeds, and Birmingham are viewed as key beneficiaries of this trend, thanks to robust job markets and ongoing urban development projects.
However, the picture is not universally rosy. Prime central London continues to underperform due to a combination of high property taxes, regulatory changes, and post-Brexit headwinds affecting foreign investment. Prices in areas like Kensington and Chelsea have reportedly fallen by as much as 15.1% year-on-year, reaching their lowest levels since 2013.
Nonetheless, the overall message is clear: the UK housing market is stronger than previously thought, and 2025 could mark a return to long-term upward momentum.
