If you’ve been eyeing the UK property market this year, you’ve probably felt a combination of excitement and scepticism.
Mortgage rates keep rising and dropping, the news reminds us of a slowing economy, and the cost of living is still high.
Property markets have always been pitched as “being the best bet.” But at the end of 2024, and with 2025 fast approaching, it’s a tough decision to make with the current scenario.
Is now really the time to put your hard-earned money into bricks and mortar, or is holding out the better decision?
We’ve got you covered in this guide.
We’ll go deep into the real picture of property investment in the UK in 2024 along with projections for 2025 to help you make a decision.
What’s covered in this guide:
Is property a good investment in the UK?
Investing in property has long been considered a reliable path. But to see if it’s true, let’s look at some important property trends and data.
1. Rising housing prices
In 2023, house prices fell due to high mortgage rates and cost of living. On average, house prices decreased by 1.4% over the year leading up to December 2023. England and Wales experienced a high decline in house prices, with 2.1% and 2.5% decrease.
While the UK house market in 2023 faced a challenging year with negative prices, 2024 and beyond show a more positive uptrend.
Owing to a fall in mortgage debt costs, house prices are projected to grow 2.5% in 2024. Hence, property sales are currently rising as people benefit from the lowest average rates of mortgage for 15 months, as per Zoopla.
As per a report, these lower mortgage rates are boosting property sales significantly. There were around 332,200 sales in Q3 of 2024 in the UK, with 30% being first time buyers. This is 23% more than the same period in 2023.
Additionally, Savills expects the house prices to increase by 4% in 2025 and by 23.4% by the end of 2029.
Therefore, now is definitely the right time to invest in properties in the UK. To keep monitoring the UK house prices, make sure to check the UK House Price Index report published by the HM Land Registry every month.
2. A steady increase in rental prices
Alongside house prices, rent prices have also been on the positive side. Here are some data points you can look at as found in a report by the Office for National Statistics.
- An 8.4% increase in the 12 months, up to September 2024
- An average increase in rent by 8.5% in England, 8.3% in Wales, and 7.2% in Scotland
- Highest rent inflation in London, is about 9.8% with South West and Yorkshire and The Humber being 6.3%
You can compare UK annual house prices and rent inflation below:
For rental property investors, this presents consistent income opportunities due to the steady demand. Even when mortgage costs may rise in the upcoming months, this stable rental income will help cover them, maintaining a consistent cash flow.
- Mortgage interest rates and borrowing costs
The same analysis by Savills shows how mortgage rates will decrease by 2029.
- 2024: 4.56%
- 2025: 4.16%
- 2026: 3.36%
- 2027: 2.64%
- 2028: 2.64%
- 2029: 2.64%
These decreased mortgage rates have improved buyer confidence, prompting them to invest.
As of November 2024, the Bank of England cut mortgage interest rates from 5% to 4.75%.
This is a more favourable environment for homebuyers and first-time buyers in the UK. This also shows lower borrowing costs. With the rates only projected to decrease in the coming years, buyers can enjoy the following:
- Reduced monthly payments
- Increased affordability towards homes that were priced high
- Restored confidence to make long-term investments, such as purchasing property
3. Historical ROI for property in the UK
Historically, property investment in the UK has been one of the most profitable ways to grow wealth. From 1995 to 2000, UK property values hit 314%, which is higher than other countries. This capital appreciation, where the property value increases over time, means that properties have outpaced even inflation and other asset classes.
Investing in properties involves leveraging capital. It means buyers can buy an asset far more than their initial investment. This is a great way to maximise returns while investing only a portion of the property’s value.
4. Supply and demand in the UK housing market
As per Savills, 2023 to 2024 is set to be a standout year for affordable homes, with a high number of Social Rent homes being completed since 2014. This supports first-time buyers and offers more attainable housing options.
Also, there’s a high focus on planning reforms by the government to meet big housing targets. These reforms will significantly increase supply, positioning UK housing even more profitable.
Below are the percentage change in UK housing supply and demand as of August 2024, as per Statista:
While the inventory levels are still low, the supply is slowly catching up. This provides hope that the market is moving toward equilibrium.
Investors must keep an eye on new supply trends (12%) and target areas showing strong demand (20%). This is a good time to expand your portfolio, especially in areas where new builds are growing.
Is Buy-to-Let profitable in the UK in 2025?
Yes, buy-to-let properties in the UK will be profitable in 2025. This is based on considerations, like:
- Non-city areas are witnessing annual arises of 6.8% to 7.4%, indicating a strong rental demand
- UK house prices are steadily growing, with the average price rising by £100,000 from £167,716 in 2013 to £288,533 in July 2024.
- As per RightMove, rental properties have more than tripled since 2019, with per property rising from 8 to 25
- Projections for 2025 show that rental yields will remain high, with some areas offering high returns.
With rising rents, property will be an attractive investment in 2025. In fact, average gross yield on a newly purchased BTL in England and Wales reached 7.2%, which is a record high.
For an investor, house prices are expected to fall slightly in 2024 and 2025, with a low 1.2% drop in 2024 and 0.4% in 2025. This is a great opportunity to buy at lower prices.
How much will property prices go up in the next 5 years?
By 2029, UK house prices are expected to increase more than 23%. This is considering how mortgage rates have eased, bringing a wide pool of home movers into the market.
Coming to commercial real-estate properties, Statista anticipates a CAGR of 0.54% until 2029, reaching a market volume of more than 4 trillion dollars. This is due to a surge in demand for office spaces, especially in London.
Is it cheaper to rent or buy in the UK for property investment?
It’s cheaper to rent for property investment due to lower upfront costs, such as large down payment, stamp duty, fees, maintenance, and so on. However, this is only beneficial for investors who want to minimise short-term expenses. Currently, the average rental yield is between 5% to 8%.
Those who are looking for long-term investment returns, buying a property is more suitable. This is especially profitable now as after a period of high mortgage rates, they are now stabilised and cut by the Bank of England. This makes acquisition more accessible, even for those who were previously priced out.
However, to maximise ROI from renting investment properties, investors must have a good understanding of the market since there’s high demand with limited supply. To know which areas have the most profitable supply, contact Pluxa Properties without delay.
Is it worth being a landlord in the UK?
It’s worth being a landlord in the UK in 2024 for well-informed investors. This is because of compliance requirements and work that needs to be done as a landlord. While it’s not a quick win, buying a property now could bring in yields over time as demand outpaces supply.
The investor must be familiar with current changes, such as:
- The new Renters’ Rights Bill that will eliminate Section 21 no-fault evictions
- Introduction of a private rented sector database
- Increased opportunities due to a drop in mortgage rates
- Strong rental demand, with 15 applicants per property (above pre-pandemic level)
- An additional 120,000 rental homes needed to meet the demand
As such it’s still worth consulting a trusted advisor to review the figures before making any decision, be it first-timers or professionals.
Is property a better investment than savings?
With the current scenario in the UK, property is still a better investment than savings. Considering the falling interest rates by the Bank of England, the IMF (International Monetary Fund) also recommends that UK interest rates must fall to 3.5% before the end of 2025.
As per RCI Bank, it’s very unlikely that UK savers will see an attractive interest rate (above 4%) in the next 10 years. If you’re looking to explore only the savings area, it’s recommended to start saving now as much as you can. However, it may take ten years to have any real profits.
Coming to property investments, there’s about a 72.04% increase in property prices when compared from 2013 to July 2024. Also, RightMove also reported that the national average increase of a property price is a low 0.3% last month.
However, sales activity has increased by 29% when compared to the previous year.
With property prices only expected to increase, investing in a property now is a great decision.
What is the best type of property to invest in the UK in 2025?
Let’s compare three primary types of properties with yields. As per Savills, these are the analyses for commercial properties:
Coming to residential properties, these are the 2024 rental yields as reported by Statista.
When compared:
- Commercial properties have an average yield of 6.1%, ranging from 4% to 8.25%
- Residential properties have an average yield of 6.3%, ranging from 4.93% to 7.65%
However, the average buy-to-let rental yield in 2024, Q2 is 6.9%.
Commercial properties are also prone to market fluctuations, while residential properties offer more stability, especially in strong rental markets. As the average yield in buy-to-let properties is slightly higher, this can provide a better return for many investors. This includes the consideration for high demand for rental housing.
Buy-to-let properties and residential properties are best for immediate returns due to the shortage of supply. The property prices may stop rising once demand and supply are balanced.
Investors can consider commercial properties for long-term investment as their prime yields reach up to 8.25%. When you select prime locations, the yields are also more likely to appreciate over time.
Buy-to-Let vs Rent-to-Let: which is more profitable?
Buy-to-let is more profitable when property prices are rising. In UK areas with high buy-to-let yields, strong demand and property value increases in 2024 will offer high rental yields. When property prices are on the rise, capital appreciation adds significantly to BTL investments.
Rent-to-let, on the other hand, is more profitable when property prices are low and will continue to be low. With lower property maintenance costs as per the lease agreement, they can secure rental income without owning the property. However, they need to rely on cheaper rental agreements and flexibility to actually profit.
These are the top 10 cities in the UK with highest yields for buy-to-let properties:
How Pluxa property helps you find the best property deals in the UK
Pluxa Property is a leading UK property investment company with over 10 years of experience. We offer a variety of services, including serviced accommodations, BRRR deals, and overseas villas.
We also specialise in high-yielding investment strategies such as Rent to Serviced Accommodation, Rent to Rent, Buy to Let, and Buy to Serviced Accommodation to help clients maximise their returns across diverse property markets.
Pluxa Property serves customers in key locations like Birmingham, London, Manchester, Cardiff, and many more. Our clients appreciate their personalised service, transparent advice, and some amazing portfolio-building strategies.
Many investors have found success through Pluxa-Property’s expert management and diversified investment approach. To be one of them, contact us today!
Peter Juhasz is the founder of Pluxa Property, the biggest property investment company in UK and Group CEO of AIP Capital Group and a property investment expert with over a decade of experience in the UK market.
He built a successful property company using innovative cashflow strategies like Serviced Accommodation and HMOs, scaling to 200 units in four years.
Peter leads a team specializing in property and business acquisitions across various sectors. A former co-host of “Cashflow With Property,” he shares his expertise in real estate investing and business scaling.
He is committed to continuous learning and helping SME owners and investors maximize their returns, driven by his passion for empowering others to achieve their financial goals.
To learn how Pluxa Property can help you in UK property investment, contact our experts.
