Q4 2025 Review
No one expects an early return to a period of exceptional capital and rental growth such as we saw in 2022 but, in many respects, conditions do look to be improving. Market conditions as at the end of Q4 can be summarised as follows:
· Buyer demand for homes continues to exceed the available supply.
· Rental demand likewise exceeds supply, UK-wide.
· In both markets, the shortfalls in supply (though reduced) should result in sustained upward pressure on average values next year.
· Asking prices have continued to rise more quickly in the UK’s more affordable markets, i.e. where the effects of Stamp Duty and mortgage interest costs are less pronounced.
· At a regional level, rental growth rates have not varied as much as in the sales market. They have fallen within a relatively narrow band across the UK, but they have generally remained positive.
· Yields continue to be very good, producing real terms gains.
· Yields vary somewhat by region; the best returns being earned in more affordable markets.
· Inflation and interest rates are both expected to follow slow downward paths over the next two years.
· These factors, coupled with continued real-terms growth in average earnings, should help to ease affordability pressures and create more room in the market for price growth.
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