Over the past decade, the UK has witnessed a sustained increase in property prices, fundamentally reshaping the property market. For both experienced and first-time property investors, this upward trend has created both challenges and opportunities in the market. But why are prices continuing to rise and how should investors respond? In this article, we’ll explore the reasons behind rising UK property prices and what this means for investors for the rest of 2025.
How Much Have Property Prices Risen By?
Property prices in the UK have seen significant growth in the past ten years. According to the Office for National Statistics (ONS), the average UK house price has increased by over 70% since 2013. In 2013, the average home was worth around £170,000. By May 2025, that figure has climbed to £296,000.
One of the most notable increases in the UK property market occurred in 2021, following the Covid-19 pandemic. Government incentives such as the stamp duty holiday, combined with a surge in demand after the pandemic-induced slowdown, contributed to a 10.2% rise in average property prices between 2020 and 2021 — an increase of approximately £35,000.
Even with recent economic challenges and inflation, property prices have remained strong and are continuing to rise in many areas across the UK.
Why Are Prices Rising?
Several key factors contribute to the UK’s rising property prices.
Demand and Supply Imbalance
One of the biggest factors in the rising property prices is the ongoing imbalance between housing demand and supply. There has been a considerable shortage in the number of homes built to meet the growing demand.
The UK population has grown steadily over this period of time, driven by natural growth and immigration, increasing the number of people who are in need of accommodation. Meanwhile, the construction of new homes has lagged behind this population growth. Although the government has made efforts to address this, such as promising to build 1.5 million homes by the end of the current Parliament, a shortfall in available homes is still expected.
This shortage causes prices to increase, especially in areas with high employment and infrastructure investment, where people are particularly keen to move to.
Mortgage Rates
The Bank of England’s interest rate decisions have a huge influence on property prices. From the beginning of 2025, the Bank has been gradually easing mortgage rates after a period of steep increases in 2022 and 2023 to deal with inflation and the economic impact of former Prime Minister Liz Truss’ mini-budget. With rates stabilising and gradually dipping in the first half of 2025, borrowing has become more affordable again for many buyers.
Lower borrowing costs increases the number of people who can access mortgages, in turn boosting demand which drives house prices higher. Competitive mortgage deals have returned, and banks are once again offering incentives to attract borrowers.
Discover how interest rates set by the Bank of England impact the property market.
Stamp Duty Threshold
Government policy also plays a key role. The increase in stamp duty threshold in April 2025, prompted a surge in market activity, with buyers rushing to complete purchases before the changes came into effect. This sudden increase in demand caused a short-term price spike.
Although this was a temporary effect, it has contributed to overall price inflation over the past 12 months.
Regional Differences
While prices are rising nationally, some regions have seen much bigger increases than others.
- North West: This region continues to show strong growth due to regeneration projects, affordable prices, and increasing demand from both homeowners and investors. Manchester, Liverpool, and surrounding areas have outperformed many parts of the country in recent years.
- London: Property prices in London remain the highest in the country, but growth has been slower in recent years due to affordability issues and a shift in demand toward regional cities. However, central areas with limited stock still see higher prices.
- North East: Traditionally more affordable, this region is gaining investor attention due to its low entry prices and growing rental demand.
- South of England: Prices remain high, particularly in the South East, although growth has cooled slightly. Commuter towns continue to attract interest due to their proximity to London.
Will Property Prices Keep on Rising?
Property prices are likely to continue rising. Savills forecasts 23.4% price growth by 2029, with 4% forecast for 2025, 5.5% for 2026, 5% for 2027, 4% for 2028, and 3% for 2029. Price growth will be more moderate in the South of England, where affordability constraints are hitting tenants more harshly.
The North of England, in particular, is forecast for much higher growth. Due to the lower base prices, regenerations, investment in infrastructure, and growing demand, regions like the North West and East are becoming increasingly attractive to tenants and investors. Savills predicts 29.4% growth for the North West by 2029 and 28.2% for the North East by 2029, the agency’s highest forecasts for any region.
New legislation, such as the Renters Rights Bill, could also have an impact on property prices. While it is designed to improve the conditions for tenants, some landlords may reconsider their portfolio, potentially influencing supply and demand in the private rental sector.
Click here to learn more about the impact of the Renter’s Rights Bill.
What Can Investors Do?
While property prices are rising across the UK, there are still many opportunities for investors to capitalise on. By focusing on the North of England, investors can find excellent value for money, with properties that are both affordable and capable of generating strong rental returns.
- North West potential: Cities like Liverpool and Manchester offer growth potential with relatively low purchase prices.
- Focus on rental yield: With rising house prices, rental income becomes even more important to ensure profitability.
- Stay informed on legislation: Understanding upcoming changes like the Renters Rights Bill will help investors plan and protect their portfolios.
- Diversify: Spreading investments across multiple regions can help investors balance their portfolio and improve overall cash flow.
- Expand into new markets: Investing in student properties, HMOs, or short-term lets is a great way to purchase more affordable property while generating high returns.
- Invest in regeneration zones: Purchasing off-plan property in regeneration zones primes investors for strong capital growth, while purchasing at more affordable rates.
Consult with Advantage Investment
At Advantage Investment, we specialise in helping property investors make informed, strategic decisions. Whether you’re just getting started or expanding an existing portfolio, our agents offer expert guidance, tailored advice, and access to exclusive investment opportunities.
Contact us today to learn more about the best places to invest in the UK and how you can make rising property prices work to your advantage.
