UK Real Estate Market Report 2025
2025 is the year of real estate reawakening
With interest rates falling, foreign investment rising, and regional cities booming, the UK property market is rewriting the rulebook. Whether you’re selling, buying, or building, this data-backed report reveals where the smart money is headed — and how to stay ahead of the curve.
Marketing Research & Website Strategy
Market Snapshot 2025
The UK property sector is valued at £33.42 billion in 2025 — a key pillar of the nation’s economy and a global investment magnet.
The residential segment dominates — forecast to hit US$19.89 trillion this year — and is projected to grow at a 2.49% CAGR through 2029, reaching US$26.41 trillion.
Falling base rates (currently 4.5%, expected to drop to 3.75% by year-end), combined with £5.2 billion in foreign investment, are injecting fresh momentum.
And with the UK ranking #2 globally behind the US in total property market size, international eyes are firmly fixed here.
“The UK’s market resilience draws investors worldwide,” says Mordor Intelligence.
Market Value Trends (2019–2025)
| Year | UK Real Estate Market Value (USD) |
|---|---|
| 2019 | $25.40 trillion |
| 2020 | $26.70 trillion |
| 2021 | $28.35 trillion |
| 2022 | $30.12 trillion |
| 2023 | $31.78 trillion |
| 2024 | $32.60 trillion |
| 2025 | $33.42 trillion |
Source: Mordor Intelligence, Statista
87%
MOBILE SESSION
207%
PROFIT INCREASE
438%
ADWORDS ROI
We helped a UK property firm cut ad spend by 44%, boost ROI to 438%, and drive 723% more organic traffic.
214%
SEO ROI
How Are Sectors Performing?
In 2025, the UK property market is shifting. Homes and eco-friendly buildings are in high demand, while offices and commercial spaces are changing to fit new ways of working.
Valued at USD 380.99 billion, the Residential real estate market is expected to surpass USD 503.86 billion by 2030, driven by ongoing housing shortages and the push for greener living.
Commercial Real Estate, now worth USD 156.12 billion, it’s projected to grow to USD 192.79 billion by 2030, with logistics, mixed-use spaces, and sustainable office retrofits leading the charge.
The Build-to-Rent (BtR) sector attracted £5.2 billion in 2024, marking an 11% year-on-year rise. 36% of this was funnelled into single-family housing — a sign of shifting tenant needs and strong investor appetite.
Eco-developments is gaining momentum. The UK’s green building materials market stood at USD 6.6 billion in 2024 and is forecast to grow at 11.1% CAGR, reaching USD 17.1 billion by 2033 — reshaping how properties are designed and built.
Investment in the UK’s Single Family Housing (SFH) sector reached £2.5 billion in 2024, up from £2.0 billion in 2023, reflecting a shift towards the Living Sectors. – Savills
Sector Growth Comparison (2025)
| Sector | Market Size (2025, £ billion) | Growth Rate (CAGR) |
|---|---|---|
| Residential | 380.99 | 5.75% |
| Commercial | 156.12 | 3.2% |
| Short-Term Rentals | 95.20 (est.) | 4.5% |
| Eco-Developments | 68.50 (growth-driven) | 20% YoY |
Source: Mordor Intelligence, Savills, Knight Frank, abrdn
Which UK Regions Are Leading?
2025 sees a major rebalancing of the UK market — away from London, and towards high-performing northern cities.
Manchester is setting the pace, with current average rental yields of 6.5% and estimated capital growth of up to 12% by 2030, driven by its booming tech sector and the HS2 infrastructure uplift.
Leeds follows closely, showing 5.9% annual price growth and an average property price of £242,000, positioning it as a high-value northern hotspot.
Liverpool is on the rise with 8.5% annual price growth, fuelled by large-scale regeneration projects like Liverpool Waters.
London, while still the most expensive market with an average price of £548,939, is seeing slower growth at 1.9%–2.3%, held back by ongoing affordability challenges.
“Northern powerhouses outpace London’s sluggish recovery,” reports Savills.
Regional Price Growth 2025 (Top 5 Cities)
| City | Avg. Property Price (£) | YoY Growth % | Rental Yield % |
|---|---|---|---|
| Manchester | 271,000 | 12% | 6.0% |
| Leeds | 250,000 | 5.5% | 5.2% |
| Liverpool | 230,000 | 4.8% | 5.8% |
| Birmingham | 270,000 | 6.1% | 5.5% |
| London | 548,939 | 2.3% | 3.7% |
Source: Savills, Select Property, Nationwide, The Guardian
Buyer Behaviour in 2025
In 2025, buyer behaviour across the UK will be shaped by a mix of economic factors and shifting priorities — from global investors to first-time buyers, changing conditions are driving new patterns of demand.
Foreign investors have increased their share in the UK’s commercial real estate market, even as the overall market value declined to £949 billion.
Buy-to-let investors are returning, especially to regional markets like Birmingham, where rental values are projected to rise 22.2% by 2028.
First-time buyers are growing despite mortgage hurdles. In 2024, the number of first-time buyers increased by 20%, totalling 341,068 purchases, and accounting for 54% of all mortgage-financed property transactions—the highest proportion since 2014.
Downsizers, now accounting for 15% more buyer demand, are fuelling a wave of demand for efficient, accessible homes.
“We think 2025 will continue to be a buyer’s market, which could provide buyers with more negotiating power, given the number of available properties per estate agent is at a decade-high for this time of year.” — Tim Bannister, Property Expert at Rightmove.
Rates, Inflation & House Prices: The Economic Picture
Economic factors in 2025 interplay to shape real estate affordability and pricing trends. Falling rates offer hope, but inflation and house price shifts test the market’s balance.
The Bank of England held the base rate at 4.5% in February 2025, with a cut to 3.75% expected by December—likely to stimulate borrowing and support market activity.
Mortgage rates are already reacting, with average two-year fixes easing to 5.32%, down from 5.55% in 2024, offering some relief to buyers.
Yet, inflation remains a key concern—rising from 2.8% in February and projected to hit 3.2% by mid-2025—tightening household finances.
Meanwhile, house prices showed mixed momentum: the average UK home rose to £268,548 in January 2025, up 4.9% year-on-year, before dipping slightly to £267,500 in March 2025—hinting at a possible market cool-off.
“Falling rates lift spirits, but prices and inflation keep affordability in check.” – Lloyds Banking Group
Interest Rates vs. House Prices (2020–2025)
(Dual axis chart showing rate drops vs. price changes)
| Year | BoE Base Rate (%) | Avg. House Price (£) |
|---|---|---|
| 2020 | 0.10 | £231,000 |
| 2021 | 0.25 | £247,000 |
| 2022 | 1.75 | £262,000 |
| 2023 | 4.00 | £255,000 |
| 2024 | 5.25 | £268,548 |
| 2025 | 4.5 (→ 3.75%) | £267,500 |
Source: Bank of England, HM Land Registry, Halifax
Investor Sentiment
In 2025, investor confidence is being shaped by improving capital flows, falling debt costs, and a clear shift in asset preferences.
European real estate investment volumes are predicted to surpass €50 billion in Q1 2025, a 28% year-on-year increase, according to Savills.
Asset classes like logistics and Build-to-Rent (BtR) remain in strong demand, offering yields of 5.5% and 4.5% respectively, while office investments continue to adapt with an average yield of 4%, as per abrdn.
The cost of debt has eased slightly — down from 5.8% to 5.62% in 2024 — and is forecast to fall further to 4.79% by December 2025, according to Morningstar projections.
Overall, ROI expectations remain steady at 5%, though market analysts expect yield compression to around 4.8% in the second half of the year, signaling a competitive landscape for prime opportunities.
“Cheaper debt fuels optimism, though yield tightening looms,” predicts CBRE.
Investment Volumes & Yields by Asset – 2024
| Asset Type | Investment Volume (£B) | Average Yield (%) |
|---|---|---|
| Residential | £4.2 | 5.0% |
| Logistics | £2.1 | 5.5% |
| Offices | £1.8 | 4.0% |
| Retail | £1.2 | 4.3% |
| Mixed-Use & Other | £1.2 | 4.7% |
Source: CBRE, abrdn, Morningstar (2024)
Key Takeaways
Interest Rates Are Falling
The Bank of England is expected to cut the base rate from 4.5% to 3.75% by December 2025 — making borrowing cheaper and improving buyer sentiment.
Regional Cities Are Surging
Northern hubs like Manchester (+12%), Birmingham (+6.1%), and Leeds (+5.5%) are outperforming London in both rental yields and capital growth.
Green Developments Are Booming
Eco-first homes are in demand, as net-zero targets drive both construction and buyer preference.
Foreign Investment Is Rising
Overseas investors poured in £5.2 billion in 2024 — up 8% YoY — focusing on prime residential and commercial stock.
Build-to-Rent Is Booming
The Build-to-Rent (BtR) sector attracted £5 billion in 2024, with yields up to 4.5%, driven by shifting renter preferences.
Affordability Remains Tight
Despite lower rates, mortgage payments now take up 35% of income — the highest in 15 years — highlighting ongoing affordability pressures.
FAQs
What is the projected growth rate of the UK real estate market for 2025?
The UK real estate market is expected to grow at a Compound Annual Growth Rate (CAGR) of 5.74% from 2023 to 2033.
Who are the key players in the UK property investment market?
Prominent players include Savills, CBRE Group, Knight Frank, and Jones Lang LaSalle (JLL), known for their significant market influence and comprehensive property services.
What are the top challenges property investment agencies face in 2025?
Key challenges include mismatches in buyer and seller expectations (50%), an uncertain geopolitical landscape (48%), and ambiguity regarding the trajectory of interest rate cuts (32%).
What are the current house price trends in the UK?
How is inflation impacting the UK real estate market in 2025?
Inflation is projected to rise to 3.2% in 2025, potentially affecting property values and influencing investment decisions.
What are the anticipated interest rate changes in 2025?
The Bank of England has reduced the base rate to 4.5% in February 2025, with expectations of further cuts to stimulate economic growth.
How will mortgage rates evolve throughout 2025?
Mortgage rates are expected to gradually decrease in alignment with base rate cuts, enhancing affordability for buyers.
Want More Leads, Sales & Profit in 2025?
At Credofy, we help real estate businesses double revenue with high-converting websites, clear messaging, and no-nonsense marketing.
We’ll audit your business and show you exactly how to make more profit online with our simple, and proven approach.