Leading estate agency Knight Frank has revised upwards its UK house price forecasts for 2025, citing a more favourable interest rate environment and ongoing resilience in key segments of the market.
House Price Forecasts: Strength in the Face of Change
The agency now expects average UK house prices to rise by 3.5% this year, up from its previous estimate of 2.5%. Over the five-year period from 2025 to 2029, cumulative growth is now projected at 22.8%, a notable increase from the 19.3% forecast made in November 2024.
While growth expectations have strengthened broadly, Prime Central London (PCL) is the exception. Knight Frank has downgraded its 2025 forecast for this high-value segment to 0%, reflecting a more uncertain political landscape and the government’s decision to abolish the non-dom tax regime. The resulting loss of demand from wealthy overseas buyers has contributed to PCL’s subdued performance—average prices in this segment remain 18% below their peak over the past decade.
In contrast, Prime Outer London (POL) and the Prime Country markets—covering properties typically priced above £750,000 outside the capital—are expected to perform solidly. These “needs-driven” areas continue to benefit from stable demand, even amid regulatory and tax changes.
Rental Market: Growth Driven by Supply Constraints
On the rental side, Knight Frank’s forecasts have also been revised slightly upward due to persistent supply shortages. The agency now anticipates UK rents will rise by 18.8% cumulatively over the next five years, up from 17.6% previously. In Greater London, rental growth is forecast at 17.1%, up from 15.3%.
Rising demand and limited supply remain the key drivers of rental growth. The number of new rental listings in England remains 18% below pre-pandemic levels (Q1 2019), according to Rightmove data. Meanwhile, upcoming changes such as the Renters Rights Bill—which will make it more difficult for landlords to repossess properties—are expected to further constrain supply.
Landlords are also grappling with rising mortgage costs and new energy efficiency regulations requiring a minimum EPC rating of C by 2030. These pressures are prompting some to exit the market entirely, further tightening the rental supply.
Despite these challenges, Knight Frank believes rental demand will remain robust, supported by ongoing affordability issues in the sales market. As mortgage rates normalise, many potential buyers are expected to remain in the rental sector longer.
