Strengthening Housing Market Persists, Yet Potential Challenges Loom by 2025 (as per RICS)
The housing market outlook for 2025 presents a mixed yet cautiously optimistic picture, shaped by several factors such as mortgage rates, consumer confidence, stamp duty, and rental market conditions.
Mortgage rates are anticipated to remain elevated compared to previous years, primarily hovering between 6% and 7%, with occasional spikes above 7%. A return to historically low rates (3-5%) is not expected. This persistent upward pressure is due to ongoing economic growth, inflation concerns, and government debt issues, making affordability challenging throughout 2025 [2][3].
Zillow projects a slight decline in home values by about 1.4% due to rising inventory and some buyer caution amid higher mortgage rates and weakening labour market concerns. However, existing home sales are forecasted to increase modestly by around 1.9% to 4.14 million units, bolstered by greater inventory that gives buyers more leverage [1]. The National Association of Realtors (NAR) expects stronger home sales growth: existing home sales rising by 6% in 2025 and new home sales by 10%. Median home prices are predicted to increase by 3%, showing some resilience despite challenges [3].
Consumer confidence is moderated by downgraded GDP growth (from 2.1% to 1.7%) and slightly higher inflation expectations, but the housing market shows signs of gradual recovery and stabilisation after previous volatility [3].
Specific recent data on stamp duty changes or impacts in 2025 were not found in the search results. However, stamp duty policies traditionally influence buyer demand and affordability; any adjustments typically affect market momentum, but no concrete 2025 updates are indicated here.
Rent growth is expected to moderate, with single-family rents rising around 2.8% and multifamily rents by 1.6%. This slowdown reflects new construction increasing vacancy rates and balancing supply and demand, leading to softer rent inflation [1].
Overall, the 2025 housing market is expected to face affordability pressures due to high mortgage rates, with modest increases in home sales and mixed home price trends. Rental market growth will be softer due to new supply, and consumer confidence is cautious given broader economic slowdowns. Buyers may find more negotiating power with increased inventory, but elevated financing costs will remain a key headwind [1][2][3].
Knight Frank predicts that house prices will rise by 2.5% next year, and 3% in 2026. Consumer and business confidence across the economy have deteriorated of late, according to Tarrant Parsons, RICS senior economist, which could begin to feed through into housing market conditions in the months ahead. Some mortgage rates have risen since the Autumn Budget, and depending on swap rate movements, mortgage deals could become more expensive again next year.
References: [1] Zillow (2022). Zillow Home Value Forecast: 2022, 2023, 2024, 2025. Retrieved from [2] National Association of Realtors (2022). 2025 Housing Forecast. Retrieved from
- Despite expectations of a slight decrease in home values, the high interest rates in the finance sector may discourage some potential investors from entering the real-estate market in 2025.
- The cautious outlook for consumer confidence, influenced by factors like GDP growth and inflation concerns, could impact the housing-market momentum, as buyers might be more mindful of their investment decisions due to economic uncertainties.
- In the light of Knight Frank's predictions, moderation in rental market growth, driven by increased supply and softer rent inflation, could offer opportunities for investors to explore properties in the housing market of 2025.
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