House Prices and Rents Continue to Rise Across the UK – ONS

The UK property market is seeing considerable trends, and house prices and rents continue to rise. Housing property prices, the most recent data from the Office for National Statistics (ONS) indicate, have increased by 4.9% during the 12 months to January, pushing the average UK house price to £269,000. This is quicker than December's 4.6%, and it is the fastest expansion since January 2023.

This upward trend in property prices could be influenced by a surge in buyer activity ahead of upcoming changes to stamp duty, set to take effect on 1 April. With more buyers rushing to complete their transactions before the new rates kick in, the property market has experienced a boost in momentum. As a result, we’ve seen a healthy year-on-year growth in buyer demand, sales agreed, and new listings.

Market Momentum In The Face Of Tax Overhaul

Guild of Property Professionals CEO Iain McKenzie says hectic market activity early in 2025 has seen buyers and sellers scrambling to seal deals ahead of the stamp duty overhaul. Regardless of possible market fine-tuning once the tax overhaul takes effect, McKenzie says he is bullish. "Better mortgage rates and sustained growth in earnings are setting a good basis for price stability.". The horizon is optimistically cautious, particularly with the prospect of further government intervention in the Spring Budget," he continues.

With the property market still active, investors should think about the implications of these events and the prospect of durable price stability. The conjunction of increasing prices, better mortgage rates, and increased activity among buyers is a favorable backdrop for those who seek to take advantage of the market.

Rents Soar as Affordability Concerns Rise

At the same time, rents have also seen sharp rises. In the 12 months to February, UK private rents increased by 8.1%, although this is a fractionally slower rate than January's 8.7% increase. Rent growth is an indication of ongoing demand, especially in inner UK cities like London.

Richard Donnell, Zoopla's executive director, quotes the pressure of affordability under which the renters are currently operating, i.e., in places such as London. Combined with the aspect that there is a greater demand for property by first-time buyers willing to buy their residences, pressure on renting property has relaxed. Donnell foresees that rental inflation would remain sluggish in 2025, courtesy mostly of the aspect of affordability being one that most renters find difficult to endure.

The rental market at home also tells the story of increasing demand. Rents in England have increased by 8.3%, with the average rental now standing at £1,381 per month. In Wales, rents were up 8.5%, to £785, and in Scotland, up 5.8%, to an average of £998. Northern Ireland experienced a rise of 8.1%, putting the average rent at £832.

Uncertainty Ahead for Landlords

Tom Bill, UK residential research director at Knight Frank, mentions the potential effect on the market from the Renters Rights Bill. While the purpose of this new bill is to give tenants greater protections, it can end up making the provision of rental housing even more limited, and thus the cost of rents even higher. "The Renters Rights Bill has the potential to add uncertainty to landlords' minds, which could increase rents at a time when they were just starting to come down from recent highs," says Bill.

For investors in property, this is worth watching. With the increasing shortage of rental properties, the cost of rentals may keep on going up, earning rewards for homeowners of properties in popular locations.

Important Observations for UK Property Investors

With housing prices still on the rise and rents not yet slowing, the UK property sector continues to thrive. Heading into 2025, there are some things worth noticing:

Price Stability: Mortgage rate improvement and purchase demand will hopefully restore price stability in the market.

Rental Growth: While slowing, rent growth still outruns earnings. It might be a good idea for investors to capitalise on this sustained growth.

Market Adjustments: While the market is witnessing a boom, one has to be aware of any post-stamp duty correction or adjustment brought about by new regulations.

For the ones who watch the market closely, these trends make several opportunities available for growth and investment in the UK real estate market. Staying informed, though, of the newest legislative developments and economic shifts will be the decisive component in making rational strategic decisions.