UK Property Market: What does Q1 teach us about the months ahead?

Spring is typically the busiest season in the property market calendar. Is that likely to be the case this year?

As we move through 2025, the UK property market continues to demonstrate resilience while it adapts to current lending conditions, regional price variations, and broader economic developments.

Property prices

House prices have remained relatively steady, with annual growth holding at a positive +3.9% as of March, keeping the average UK property valued at £271,316¹. While mortgage approvals dipped slightly in February², this appears to reflect a more considered approach from buyers rather than any underlying market weakness.

Regionally, Northern England, Northern Ireland and Scotland continue to show stronger growth than London and the South, offering attractive opportunities for buyers.

Looking more closely at market indicators, data reveals:

• Asking prices rose by +1.1% from mid-February to mid-March, marking the third consecutive monthly increase.
• Prices are now +1% higher over last year, with sales agreements up by +9%³.
• The prime London market remains resilient, with asking prices in Kensington and Chelsea rising by +3.5%, and Westminster by +3%⁴.
• LonRes data shows central London property values edged up by +0.6% in February, with luxury property transactions (£5m+) rising sharply by +13.8%, centred around Mayfair, Bayswater, and Maida Vale5.

Encouragingly, property transaction volumes remain robust, with HMRC reporting a +13% month-on-month rise in February over January and ONS data showing a significant +28% increase compared to February 2024⁶ – likely influenced by the forthcoming stamp duty changes.

Mortgage rates and affordability

While overall mortgage lending has increased, net borrowing has eased slightly, reflecting a measured and thoughtful approach from both lenders and borrowers.

The Bank of England held its base rate steady at 4.5% in March, taking into account ongoing global financial uncertainties and a slight easing in inflation, which reduced from +3% to +2.8%. It was reassuring to hear Governor Andrew Bailey suggest that rates are expected to follow a ‘gradually declining path’ – potentially positive news for borrowers in the months ahead.

Looking further ahead, the Office for Budget Responsibility forecasts three potential rate cuts by mid-2026⁷, which could help create more favourable conditions for property purchases.

Affordability remains a consideration for many buyers, with the average affordability ratio in England currently at 7.7 times average income⁸. This continues to shape regional trends, with buyers increasingly looking beyond traditional hotspots in search of better value.

Rental market

The rental market continues to be influenced by limited property availability, which is placing upward pressure on rental prices – particularly in London, where annual rental growth across prime areas rose to 6.0% in February, the highest level since November 2023. Average rents are now 33.3% above their pre-pandemic levels⁹.

This environment is presenting attractive opportunities for buy-to-let investors, particularly those looking to secure properties in high-demand areas. That said, landlords should stay mindful of potential regulatory changes that could influence the investment landscape.

Government policies

The property market continues to adjust to recent fiscal policy updates, including changes to stamp duty. These adjustments have contributed to a more measured level of demand in certain segments.

International buyers may also find the current trade policy environment particularly supportive, especially US investors. Modest tariffs under existing US-UK trade agreements, combined with favourable exchange rates, have also helped sustain international interest in UK property.

Looking ahead, the government’s approach to housing supply and planning regulations will be important to monitor, as developments in these areas could influence both the pace of new construction and property values across.

What this means for you

For buyers and investors, there are still worthwhile opportunities across the property market. The prime sector remains an appealing option, especially with potential interest rate cuts on the horizon. Regional markets in Northern England and Scotland are also gaining attention, offering good value outside the traditional hotspots.

International buyers, especially those with US dollar-based assets, may benefit from the current exchange rate, while the luxury market remains strong, backed by major investments.

Looking ahead, we expect modest but steady house price growth, particularly in prime locations and regional centres. Any future rate cuts from the Bank of England could improve buying power, while ongoing international interest should continue to support prime property values.

While no market is without its uncertainties, UK property – especially in the prime and super-prime segments – continues to offer opportunities. We are here to guide you through these conditions and help you make the best decisions for your individual property goals.

Using our wealth of expertise and network of trusted advisers, we can support you with bespoke lending solutions, ensuring they are aligned with your financial objectives.

Sources:

¹Annual house price growth stable at 3.9% in March – Nationwide

²Money and Credit – February 2025 | Bank of England

³What’s happened with house prices this month? | Property news

⁴PowerPoint Presentation

⁵Monthly Briefing: Prime London Market – March 2025 – LonRes

⁶UK monthly property transactions commentary – GOV.UK

⁷Spring Statement: OBR expects three rate cuts by mid-2026   – Mortgage Strategy

⁸Housing affordability in England and Wales – Office for National Statistics

⁹Monthly Briefing: Prime London Market – March 2025 – LonRes