Authored by the expert who managed and guided the team behind the United Kingdom Property Pack
Everything you need to know before buying real estate is included in our United Kingdom Property Pack
What will happen in the UK’s real estate market? Will prices go up or down? Is London still a hotspot for foreign investors? How is the UK government impacting real estate policies and taxes in 2025?
We’re constantly asked these questions because we’re deeply involved in this market. Through our work with estate agents, property developers, and clients who buy properties in the UK, we’ve gained firsthand insights.
That’s why we created this article: to provide clear answers, insightful analysis, and a well-rounded perspective on market predictions and forecasts.
Our goal is simple: to ensure you feel informed and confident about the market without needing to look elsewhere. If you think we missed the mark or could do better, we’d love to hear your thoughts. Feel free to message us with your feedback or comments, and we’ll work hard to improve this content for you.
How this content was created 🔎📝
Fact-checked and reviewed by our local expert
Laurence Rapp 🇬🇧
Sales representative at Spot Blue - International Real Estate Agency
1) Fewer foreign buyers will invest in UK property because of stricter regulations and taxes
The UK has recently ramped up its property tax regulations, especially for foreign buyers.
In 2024, the UK government hiked the Stamp Duty Land Tax (SDLT) rates for non-resident buyers, making property investments pricier for foreigners. This move is part of a broader strategy to make the UK property market less appealing to overseas investors. The increased costs are a significant deterrent, pushing many to look for more affordable options elsewhere.
On top of that, new taxes specifically targeting overseas property investors have been introduced. For example, the SDLT surcharge for overseas second-home buyers can soar up to 19%. This hefty surcharge is a clear signal that the UK is tightening its grip on foreign property investments, making it less attractive for those seeking cost-effective opportunities.
The UK government has also rolled out measures to boost transparency in property ownership. The 'Register of Overseas Entities' is one such initiative, aimed at curbing money laundering through property deals. While this is a positive step for transparency, it adds another layer of complexity and scrutiny for foreign buyers, potentially discouraging them from entering the UK market.
In 2023, the impact of these changes was already evident, with a 44% drop in purchases by foreign investors compared to the previous year. This decline highlights the tangible effects of the regulatory shifts on foreign investment in UK real estate.
Sources: Branch Austin McCormick, UK Government, CBRE
2) Property prices in Scotland will rise significantly as people move away from crowded English cities
Scotland is becoming a hot spot for those wanting to leave the hustle and bustle of England's cities.
One big reason is the rising property prices in Scotland's rural areas. Since 2015, house prices have been climbing steadily, with a 4.3% jump from June 2023 to June 2024. This makes Scotland an appealing option for those looking for more space without breaking the bank.
There's also been a noticeable increase in people moving from England to Scotland. Between mid-2021 and mid-2022, net migration into Scotland more than doubled. Many are drawn by the idea of a quieter, more spacious lifestyle, away from the crowded city life.
The rise of remote work has made this move even more attractive. With the freedom to work from anywhere, people are choosing Scotland's less populated and more affordable areas. This shift has fueled demand for homes in Scottish towns and countryside, pushing prices up.
In fact, the demand is so strong that house prices saw a 4.0% annual increase in Q2 2024. This trend is expected to continue as more people seek the tranquility and charm of Scotland's landscapes.
For those considering a move, now might be the time to explore the opportunities in Scotland's property market. The combination of affordable prices and a desirable lifestyle is hard to resist.
Sources: Statista, National Records of Scotland, Buy Association Group, Scottish Government
We made this infographic to show you how property prices in the UK compare to other big cities across the region. It breaks down the average price per square meter in city centers, so you can see how cities stack up. It’s an easy way to spot where you might get the best value for your money. We hope you like it.
3) UK rental yields will rise as demand for rentals exceeds supply
Rental prices in major UK cities have been climbing steadily, and this trend is set to continue.
One of the main reasons for this is the chronic housing shortage in the UK. With a backlog of 4.3 million homes, the country is struggling to keep up with the demand. This shortage is made worse by the growing population and urbanization, which means more people are forming new households and need places to live.
The government has plans to build 1.5 million homes, but the reality is that the supply isn't meeting the target. In 2021/22, only about 233,000 new homes were built, which is far below the goal of 300,000 homes per year. This gap between what's needed and what's available is a big part of why rental prices are going up.
For those considering buying property in the UK, this situation presents an opportunity. As demand for rental properties continues to outpace supply, rental yields are likely to increase. This means that investing in property could be a smart move, especially in areas where the housing shortage is most acute.
Insider knowledge suggests that certain regions, particularly urban centers, are experiencing the most significant demand. This is where rental yields are expected to be the highest, as more people flock to cities for work and lifestyle opportunities.
In summary, the combination of a housing shortage and increasing demand is driving up rental prices. For potential property buyers, this could mean higher returns on investment in the coming years.
Sources: Joseph Mews, Centre for Cities, Portico Invest, UK Parliament
4) Rental yields in university towns will increase as more students boost demand for housing
Rental yields in university towns are on the rise as more students flood in, boosting demand for housing.
In the UK, student numbers have hit record highs, with a noticeable jump in international students. For instance, the 2022/23 academic year saw a 12.4% increase in international admissions, especially from China, India, and Nigeria. This surge means more students are looking for places to stay, particularly in purpose-built student accommodation (PBSA), which is now a big part of the housing scene in these towns.
There's a serious shortage of PBSA, with three students vying for every available bed. This gap is even wider in towns with top universities, where students are ready to pay more for convenient, well-equipped housing. As a result, rental prices are climbing, and preleasing for the 2024-25 school year has already broken past records, showing strong demand and higher rental yields.
Local councils and media are buzzing about the high demand for housing in university towns, highlighting the ongoing student housing crunch. With the UK government planning to expand higher education, the need for student accommodation is set to keep growing, pushing rental yields even higher.
Sources: Landlord Today, Miller Insurance, Housing Hand
5) More foreign buyers will invest in UK properties in smaller cities for better value and investment potential
Foreign buyers are eyeing UK properties in smaller cities for better value compared to London.
In recent years, London's property prices have skyrocketed, with the average house price hitting £519,505. This surge has made the city less affordable, prompting buyers to consider other options. Smaller cities like Manchester and Liverpool are now on the radar, offering a more attractive investment landscape.
These cities are not just cheaper; they also boast strong rental demand and impressive house price growth. Investors are drawn to the higher rental yields here, which outshine those in London. The UK government's initiatives, like the Investment Zones program, are further boosting local growth and making these areas even more appealing.
There's a noticeable shift in interest among foreign investors, who are now exploring diverse UK locations beyond the capital. The north west of England, for instance, has been a standout performer, recording the strongest house price growth in the UK in 2023 with a 3.2% increase. This trend is catching the eye of savvy investors looking for promising opportunities.
Media coverage is also playing a role in highlighting the potential of regional property markets. This attention is drawing more foreign buyers who are eager to tap into the growth potential outside of London. The combination of affordability, growth, and government support is making these smaller cities a hot spot for investment.
As London becomes increasingly out of reach for many, smaller cities are stepping up as viable alternatives for those seeking better value and returns. The shift is clear: foreign buyers are recognizing the untapped potential in these areas, making them a focal point for future investments.
Sources: Global Property Guide, UK Government, Buy Association Group
Don't buy the wrong property, in the wrong area of the UK
Buying real estate is a significant investment. Don't rely solely on your intuition. Gather the right information to make the best decision.
6) Foreign investment in UK homes will increase as the pound weakens
Foreign investment in UK real estate tends to rise when the pound is weak.
Back in 2016, during the Brexit referendum, the pound's ups and downs led to a noticeable increase in foreign buyers snapping up UK properties. This pattern is likely to happen again as the pound continues to lose strength.
Even with a market slump, foreign investors are still buying UK real estate. In 2023, the total investment was at its second-lowest in a decade, hitting £43 billion. Yet, foreign investors have been net buyers, purchasing £50 billion worth of properties while selling only £29 billion since 2022.
Real estate agencies are seeing more interest from overseas, especially from North America and Asia. North American investors have bought £8 billion more than they've sold since 2022, while Asian investors have added over £6 billion more in purchases than sales.
The pound's drop against currencies like the US dollar makes UK properties a bargain for foreign buyers. With the pound possibly trading closer to 1.21 against the dollar, it's becoming cheaper for them to invest in UK real estate.
7) Foreign buyers will target regional UK cities over London for better returns
Foreign buyers are increasingly eyeing regional UK cities over London.
One big reason is the sky-high property prices in London. Imagine this: in 2024, buying a home in London would set you back about £1.1 million. Meanwhile, in a vibrant city like Manchester, you could snag a property for around £230,000. That's a huge difference, making regional cities much more appealing for those looking to invest without breaking the bank.
But it's not just about the purchase price. Rental yields are a game-changer too. In 2023, Manchester and Birmingham offered rental yields of about 4.5%, while London lagged behind at 3.5%. For investors, this means better returns on their money in regional cities, which is a pretty compelling reason to look beyond the capital.
Foreign investment in these areas is on the rise, and it's not hard to see why. Cities like Manchester and Birmingham are experiencing strong economic growth and offer those attractive rental yields. Plus, government initiatives like the Levelling Up Fund are giving these regions a boost, making them even more enticing for foreign investors.
Infrastructure is another piece of the puzzle. Regional cities are seeing major improvements in transportation and urban development. Manchester, for instance, is undergoing significant changes with new transport links and urban regeneration projects. These enhancements make the city more accessible and livable, drawing in more foreign interest.
So, if you're considering investing in UK property, it might be time to look beyond London. Regional cities are not just offering better prices and yields, but they're also becoming vibrant hubs of growth and opportunity.
Sources: Property Ladder, Knight Frank, JLL, UK Government, Manchester City Council
8) Remote work will boost demand in rural UK, causing price surges in less popular areas
The rise of remote work is making rural living in the UK more appealing.
In 2023 and 2024, property prices in rural areas surged, with the North West of England seeing a 5.9% increase. This makes it a hot spot for those seeking affordable housing. The shift is largely driven by remote workers who now prefer the countryside. About 40% of workers have embraced remote work, craving a better work-life balance and the tranquility of nature.
The UK government has also stepped in, investing £800 million to boost broadband in rural areas. This means faster internet, making remote work more practical and attractive. As a result, more people are considering moving out of cities.
Real estate agents are noticing a trend: urban-to-rural migration is on the rise. Inquiries and sales in rural regions are increasing, partly because of the availability of coworking spaces. These spaces offer remote workers a professional setting outside their homes, adding to the appeal of rural living.
Sources: Buy Association Group, RSN Online, Use Bubbles
We created this infographic to give you a simple idea of how much it costs to buy property in different parts of the UK. As you can see, it breaks down price ranges and property types for popular cities in the country. We hope this makes it easier to explore your options and understand the market.
9) New UK policies will promote sustainable housing, influencing property development trends
The UK government is reshaping property development by promoting sustainable housing.
In recent years, particularly in 2023 and 2024, new homes in England and Wales have seen a boost in energy efficiency, with improved EPC scores reflecting this change. This means that homes are not only more environmentally friendly but also potentially cheaper to run, which is a win-win for buyers looking to save on energy bills.
Backing this green push, the government has rolled out a hefty £1.8 billion grant to support energy-efficient upgrades. This funding is a game-changer, helping homeowners install solar panels, heat pumps, and better insulation. These upgrades are not just about saving money; they’re about future-proofing homes against rising energy costs and environmental changes.
Looking ahead, the Future Homes Standard is set to become a reality in 2025, bringing in stricter building regulations. This means new homes will need to slash carbon emissions significantly, aligning with the UK's ambitious goal of net zero emissions by 2050. For potential buyers, this could mean more eco-friendly options on the market.
These changes are not just about ticking boxes; they’re about creating homes that are in tune with the environment and the future. The focus on sustainability is not just a trend; it’s becoming a standard in the property market, influencing everything from design to construction.
For those considering buying property in the UK, these developments mean more choices in sustainable living, potentially leading to long-term savings and a smaller carbon footprint. It’s an exciting time to be part of this green revolution in housing.
Sources: ONS, GreenMatch, CBRE
10) UK property demand will grow for homes with strong internet as digital lifestyles take hold
In the UK, 41% of workers are now doing remote work at least part of the week.
This shift has made a strong internet connection at home more crucial than ever. By 2025, the UK is close to achieving its goal of 85% gigabit broadband coverage, with 83% already having access. This means that most people can enjoy high-speed internet, which is essential for today's digital lifestyle.
People aren't just working from home; they're also using the internet for entertainment, education, and smart home management. This has led to a change in what consumers want, with more households opting for gigabit broadband. In rural areas, over half of the homes have already made the switch, showing a clear demand for reliable connectivity.
Real estate listings are catching on, now highlighting internet connectivity as a key feature. This shows how important it has become for property buyers. If you're considering buying a property, especially in the countryside, having a strong internet connection is increasingly seen as a must-have.
As digital lifestyles become more entrenched, UK buyers will likely place even more value on properties with robust internet connectivity. This trend is not just about convenience; it's about being able to fully participate in modern life, from remote work to streaming and beyond.
Sources: Computer Weekly, Use Bubbles, IoT Insider
11) Demand for homes with flexible spaces will grow in the UK as remote work remains common
The way we work has changed dramatically, with 41% of the UK workforce working remotely at least part of the week by 2024.
As more people work from home, there's a noticeable shift in what buyers want in a property. Terms like ‘office’ and ‘workspace’ in property listings have increased by 326%, showing a clear demand for homes with dedicated office spaces. People are also searching for outbuildings and annexes, looking for extra space to set up their home offices.
Many workers have grown to prefer remote work, with 40% reporting a more favorable view after trying it. This preference is driving a desire for homes that offer flexible living arrangements, allowing spaces to adapt to both personal and professional needs.
Architectural trends are keeping pace, focusing on multi-functional rooms that can double as living spaces and home offices. This shift reflects the needs of remote workers who want adaptable environments that cater to their new work-life balance.
In the UK, properties with flexible living spaces are becoming more desirable as remote work continues to be prevalent. Buyers are increasingly interested in homes that can accommodate their work-from-home lifestyle, making these properties a hot commodity in the market.
As remote work becomes a staple, the demand for homes with versatile spaces is expected to grow, influencing both property design and buyer preferences. This trend is reshaping the real estate landscape, with flexible living spaces at the forefront of what buyers are looking for.
Sources: Remote Work Statistics UK (2024), Property Listings (2024), Modular Home Office Furniture
Make a profitable investment in the UK
Better information leads to better decisions. Save time and money. Download our guide.
12) Demand for retirement-friendly housing in the UK will grow as the population ages
The UK is seeing a big rise in its older population.
Back in 2023 and 2024, over 21 million people in England were aged 50 and over, making up a significant 38% of the population. This is a jump from 32% in 1981. By 2044, this group is expected to grow by another 4.3 million people. This shift means more people are thinking about retirement and what kind of homes they'll need.
For those aged 65 and over, the numbers are climbing too. In 2023 and 2024, there were over 10 million people in this age group, which is an increase of over 3.5 million since 1981. Looking ahead, the number of people aged 65-79 is predicted to increase by nearly a third, while those aged 80 and over are set to more than double. This means a lot more folks will be looking for homes that suit their needs as they age.
In response, there's been a noticeable uptick in building retirement-friendly housing. For instance, in 2023, more than 9,160 new seniors housing units were built in the UK, marking a 20% increase from the previous year. Despite this growth, there remains a shortfall of over 487,000 homes for pensioners, indicating a pressing need for more retirement villages. This gap shows there's a real opportunity for those interested in investing in or developing such properties.
With the aging population, the demand for retirement-friendly housing is only going to grow. This trend is particularly notable in areas where older adults prefer to retire, often places with good healthcare facilities and community support. If you're considering buying property in the UK, looking into these areas might be a smart move.
As more people enter retirement age, the need for age-appropriate housing becomes more urgent. This is not just about having a place to live, but about creating communities where older adults can thrive. Developers are increasingly focusing on amenities that cater to this demographic, such as easy access to healthcare, social activities, and transportation.
Sources: Ageing Better, Property Wire, Audley Villages
13) UK property investors will change strategies due to new property tax changes
Changes in UK property taxes have always nudged investors to rethink their strategies.
In 2023 and 2024, the UK introduced a 2% SDLT rate for properties priced between £125,001 and £250,000, adding about £2,000 to purchases in places like West London. This made buying second homes or investment properties pricier, especially with the SDLT surcharge jumping from 3% to 5% in October 2024.
Investors started leaning towards single-family rentals and affordable housing due to the heavier tax load on private landlords. This shift was partly because the tax changes squeezed the supply of private rentals, nudging rents upwards.
Real estate agencies and experts noticed a growing interest in single-family rentals and affordable housing. Traditional rental properties lost their charm, and buy-to-let mortgage applications dipped as investors looked to cut their tax bills by diversifying.
Investor sentiment surveys from that time showed a clear move towards these new opportunities, as they offered lower tax liabilities and better returns. The increased tax burden on private landlords was a big factor in this shift.
With these tax changes, investors are now exploring alternative investment opportunities that promise more favorable tax conditions and returns.
Sources: Horton and Garton, Institute for Fiscal Studies, National Law Review
14) UK property prices will level out as the government works to stop a housing bubble
The UK government is actively working to stabilize property prices and prevent a housing bubble.
One major step has been adjusting interest rates. In 2023, mortgage rates were high, peaking at 5.8% for a five-year fixed-rate mortgage. By the end of 2024, they dropped to 4.7%, making borrowing a bit easier but still keeping demand in check.
Increasing the housing supply is another focus. The government has introduced planning reforms and financial incentives for new builds. For instance, a £500 million boost to the Affordable Homes Programme aims to deliver up to 5,000 new social and affordable homes, helping to balance the market.
Historically, government interventions have been crucial in stabilizing the housing market. Past measures, like the Help to Buy scheme, have supported first-time buyers and maintained market stability. Real estate analysts predict a slowdown in price growth, suggesting modest increases in property values.
These efforts are part of a broader strategy to ensure the market remains stable. The government is keen on preventing a housing bubble by keeping a close eye on both supply and demand dynamics. This approach is expected to lead to a more balanced market in the coming years.
For potential buyers, this means a more predictable market environment. With these measures in place, the UK property market is likely to see steady and sustainable growth, making it a potentially wise investment.
Sources: MPA Mag, GOV.UK, Norada Real Estate, Bird & Co
We did some research and made this infographic to help you quickly compare rental yields of the major cities in the UK versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you’re planning to invest there.
15) New UK rules on short-term rentals will affect buy-to-let investment profits
The UK has rolled out new regulations on short-term rentals that are shaking up the buy-to-let market.
In cities like Edinburgh, landlords now need a license to keep their short-term rentals running. This means extra compliance costs for landlords, which can eat into their profits. Many are even switching back to long-term rentals because of these new rules, which could mean fewer short-term rentals available.
These regulations are also causing a drop in short-term rental listings and occupancy rates. For example, the number of guest nights in short-term lets in the UK took a hit from Quarter 3 to Quarter 4 in 2023. This shows how regulations are affecting rental activity and, in turn, profitability.
Landlords are worried about potential fines or legal issues if they don't follow the new rules. This adds more costs and risks, further squeezing profits. Experts say these changes could shift the rental market, leading to higher costs for hosts and lower returns for investors.
With these new regulations, landlords are finding it harder to make a profit. The need to comply with licensing and registration schemes is pushing some to rethink their investment strategies. The impact is clear: short-term rental profitability is under pressure.
As the market adjusts, landlords are left to navigate these changes, balancing compliance with profitability. The landscape is shifting, and those in the buy-to-let game need to stay informed and adaptable.
Sources: BNB Calc, Search Logistics, Pluxa Property, ONS
16) Demand for smaller, affordable homes in the UK will grow as single-person households rise
Single-person households are on the rise in the UK, reshaping the housing market landscape.
In 2023, 8.4 million people were living alone, accounting for 30% of all households. This trend is fueled by factors like higher divorce rates and people marrying later, which means more years spent living solo.
Urbanization is another key player here. With more folks moving to cities for work, the UK saw an urbanization rate of 84.64% in 2023. This city shift often nudges people towards smaller living spaces, as consumer surveys and real estate reports suggest.
Economic pressures add to the mix. Stagnant wages and high property prices make smaller homes appealing, especially in cities where living costs are steep. In September 2024, the average UK house price was £291,828, but there's a noticeable tilt towards one-bedroom apartments and studio flats due to affordability issues.
For those eyeing property in the UK, this means a growing market for smaller, more affordable homes. The demand is particularly strong in urban areas, where the cost of living is a significant factor.
As more people choose to live alone, the housing market is adapting, with a clear shift towards compact and budget-friendly options. This trend is reshaping how properties are marketed and sold, especially in bustling city centers.
Sources: The Independent, Statista, NerdWallet
17) Demand for larger homes in the UK will grow as multi-generational living becomes more common
The UK is seeing a growing trend of multi-generational living, which is reshaping how new homes are designed and sized.
One major factor is the aging population, with a notable rise in the number of elderly residents. By 2044, the number of people aged 50 and over in England is expected to increase significantly, with those aged 85 and over growing the fastest. This demographic shift is pushing families to consider living arrangements that include grandparents, parents, and children under one roof.
Meanwhile, younger generations are struggling to afford homes on their own due to rising costs. This financial strain is leading more adult children to stay with their parents, boosting the demand for larger homes that can comfortably house multiple generations. Many UK adults are now open to this living style, showing a clear preference for shared family spaces.
There's also been a noticeable uptick in planning applications for home extensions or annexes, like granny flats, to provide extra living areas for extended family members. This trend is getting a lot of attention in the media, which often highlights the benefits of multi-generational living, such as saving money and having more family support.
Architectural designs are evolving to meet these needs, focusing on creating flexible living spaces that can adapt to different generations. Homes are being built with features that cater to both the young and the elderly, making them more versatile and accommodating.
Sources: Aviva plc, Statista, Make Room Outside, Age UK
While this article provides thoughtful analysis and insights based on credible and carefully selected sources, it is not, and should never be considered, financial advice. We put significant effort into researching, aggregating, and analyzing data to present you with an informed perspective. However, every analysis reflects subjective choices, such as the selection of sources and methodologies, and no single piece can encompass the full complexity of the market. Always conduct your own research, seek professional advice, and make decisions based on your own judgment. Any financial risks or losses remain your responsibility. Finally, please note that we are not affiliated to any of the sources provided. Our analysis remains then 100% impartial.