We’ve already seen a strong start to 2025’s housing sector as buyers and sellers have flocked to market, spurred by imminent changes to stamp duty land tax thresholds, lower mortgage rates and the first base rate cut of the year. The strength of this demand, particularly in comparison to the same period in 2024 and 2023, should bode well for the rest of the year and for London in particular, where a price resurgence is expected.
London price growth
In December Rightmove said it expected growth across the year as a whole in the capital to be in line or marginally ahead of the predicted 4% rise in prices nationally. In its January update, London prices rose 1.8% on the previous month, up to an average of £673,483 - the second strongest monthly regional growth recorded for the month. Meanwhile, in Zoopla’s January house price index it said that first-time buyer demand was particularly strong in London and south-east England, supporting near-term price inflation in these regions.
There are several influencing factors on demand that are likely to boost house prices:
The impact of interest and mortgage rates
With the base rate now cut to 4.5% after February’s meeting of the Monetary Policy Committee we’ve seen the first of what’s expected to be four cuts this year. The vote to cut was unanimous – with two of the nine-strong committee voting for a more aggressive cut of 0.5 percentage points, to 4.25%. However, with predictions of a rebound in CPI inflation to 3.7% in the third quarter, the government has warned of a ‘gradual and careful approach to the further withdrawal of monetary policy restraint’.
Increased affordability as a result of lower interest rates should be accompanied by further mortgage rate cuts, with 4% mortgage rates expected by the end of the year. The February cut should give more lenders confidence to bring down rates further.
A return to the office
London’s pull as an international business centre has always been evident but remote working meant location became a little less important in recent years. However, many companies based in the capital are now encouraging or mandating returns to the office up to five days a week. This means the appeal of living either in the centre of London or on the outskirts, rather than facing a lengthy and costly commute has become apparent once more and is driving demand.
Supply versus demand
This demand is being met with supply challenges which could push prices further, especially in sought-after locations. There could be a slight lull in demand just before and after the SDLT threshold change but we would expect demand to pick up again quickly as buyers and sellers look to conclude deals.
New housing development in London is more limited than in other areas of the country but it is still taking place. The Canada Water masterplan in SE16, for example, will ultimately deliver 3,000 new homes and green public spaces in a whole new central London district delivering new opportunities for those who want to live in the heart of the capital.
Setting the right price to achieve the price you want
Although prices are predicted to rise, for sellers the onus will remain on pricing competitively in order to sell in the capital. Monitoring similar local properties, obtaining multiple estimates and great staging will continue to be key factors to help you achieve the price you desire.
If you’re thinking of buying, selling, letting or renting a property and would like to discover more about how a 5-star rated multi-award-winning agency can help, we’d love to hear from you;
welcome@living-london.net
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