Uncertainty looms over UK housing market in 2025 amid budget and tax changes

Published on

The UK housing market faces a challenging start to 2025, as tax changes, geopolitical shifts and lingering uncertainty from the October Budget weigh on consumer confidence, according to insights from Tom Bill, head of UK residential research at Knight Frank.

The combination of a newly inaugurated US President, tax deadlines in April and the ongoing fallout from the Chancellor’s Budget is expected to create an atmosphere of caution among consumers and investors.

Mortgage approvals, which climbed to an 18-month high in October due to pre-emptive buying ahead of tax changes, may not sustain the momentum into the new year.

UNCERTAINTY
Tom Bill, Knight Frank
Tom Bill, Knight Frank

Bill says: “The first few months of 2025 will be marked by uncertainty as bond markets digest the Budget’s implications amid fluctuating economic data.”

Knight Frank has revised its 2025 forecasts slightly downward following a post-Budget rise in mortgage rates. Despite this, the firm still predicts modest price growth across the residential market.

The Budget’s emphasis on taxing the private sector to fund public spending has added pressure to sentiment, particularly after measures like increased employer national insurance and stamp duty adjustments were introduced.

Bill adds: “Business optimism has already hit its lowest point in two years, reflecting how fragile sentiment has become.”

MARKET DYNAMICS

The return of the nil-rate stamp duty band to £125,000 in April is set to increase bills for buyers by up to £2,500, with first-time buyers facing up to £6,250 in additional costs. This change is likely to create a surge in transactions ahead of April, followed by a slowdown, echoing patterns seen during the pandemic-era stamp duty holiday.

Meanwhile the introduction of the Temporary Repatriation Facility (TRF) in April 2025 is expected to have a significant impact on prime and super-prime property markets. Under this scheme, non-doms transitioning to the government’s residence-based tax system can bring money into the UK at favorable rates – 12% in the first two years and 15% in the third.

PROPERTY MARKET
James Quarmby, a partner in private wealth at Stephenson Harwood
James Quarmby, Stephenson Harwood

James Quarmby, a partner in private wealth at Stephenson Harwood, says: “This policy will inevitably channel funds into the property market, but its effects will materialize gradually, starting in late 2025.”

Stuart Bailey, head of London super-prime Sales at Knight Frank, reports that buyers are already aligning their property searches to take advantage of the TRF. Similarly, some non-doms are expected to use the scheme to reduce their mortgage debt by injecting equity into their properties.

Latest POLL

COMMENT ON MORTGAGE SOUP

We want to hear from you!
Leave a comment and get the conversation started.
You need to register to post, so please login or sign up below.

Latest articles

Square 1 Media announces May Mortgage Market Debate

Square 1 Media is to hold its next Mortgage Market Debate on Wednesday, 21 May,...

Coventry BS maintains status as one of the best workplaces

Coventry Building Society has been named one of Great Place to Work's UK’s Best...

Atom bank breaks Near Prime record

Atom bank has reported another record-breaking month for Near Prime activity. Over the course of...

Berkeley Alexander appoints new BDM

General insurance provider Berkeley Alexander has announced the appointment of Grant Robinson as a...

Other news

Lenders must step up on high LTV products

Things are on the up for borrowers with a smaller deposit. The financial information...

Square 1 Media announces May Mortgage Market Debate

Square 1 Media is to hold its next Mortgage Market Debate on Wednesday, 21 May,...

Coventry BS maintains status as one of the best workplaces

Coventry Building Society has been named one of Great Place to Work's UK’s Best...