Average UK house price set to rise by £10,000 in 2025 [Video] #UKFinance

A new forecast has suggested that the UK’s average house price is set to rise by 3% in 2025, followed by a further uptick of 3.5% in 2026 and 2.7% in 2027. Next year, this would bring the average house price to £300,000, or around a £10,000 increase on current levels.

Estate agency Hamptons’s near-term forecasts have remained unchanged, but the longer-term view has been downgraded due to high interest rates and the tax landscape.

Regionally, London is expected to be the winner in 2025, outperforming other regions for the first time in around a decade. Hamptons forecast a 4% annual house price growth in London in 2025.

Meanwhile rental prices are expected to outpace the rate of inflation, with increases of 4.5% in 2025 and 4% in 2026 and 2027.

Between now and the end of 2027, Hamptons rents to rise by 17.0% across Great Britain, outpacing house price growth of 12.5%.

Rental price growth for 2024 is expected to hit £1,401, with a further uptick of £1,464 in 2025 and an increase of £1,523 in 2026.

Read more: How estate agents decide how much your home is worth

The housing market has been in focus for the past few weeks as the Labour government delivered its first budget and the Bank of England’s monetary policy committee cut its key interest rate to 4.75% on Thursday.

“As the end of 2024 approaches, the mood of the housing market has shifted from trepidation to cautious optimism,” said Aneisha Beveridge, head of research at Hamptons. “Lower mortgage rates have been the principal catalyst for change, falling more rapidly than we expected.”

The average rate on a five-year fixed rate deal at 75% loan-to-value dropped from 5.2% in September 2023 to 4.1% in September 2024. Strong income growth has also helped lessen some of the pressures brought about by the cost of living crisis.

Read more: What does an interest rate cut mean for mortgages?

Despite this positive trend, the recovery is not uniform across all sectors, added Hamptons. The prime markets have been more cautious due to speculation about budget changes to capital gains, inheritance tax, stamp duty and non-dom status.

By the end of 2024, the average value of a home in Britain is forecast to be 3.5% higher than in the final quarter of 2023, outperforming our prediction last year of no change. This over-performance is attributed to a faster-than-anticipated decrease in mortgage costs as inflation fell more quickly than expected.

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