UK Property Insight Q1

UK Property Market Insight - Quarter One 2025

House Price Dynamics

Stability Returns: After 2023's correction and 2024's stagnation, average UK house prices held firm in Q1 2025. Nationwide data showed a 0.4% quarterly increase, driven by demand stabilisation in southern England and urban centres.

Regional Divergence:

London & South East: Benefited from improved mortgage conditions, with price growth of 0.5–0.8%.

Scotland & Northern Ireland: Remained flat due to affordability constraints and limited supply-side growth.

North West & Midlands: Balanced supply/demand led to minimal movement but early signs of investor interest are emerging.

Buyer Sentiment & Mortgage Lending

Mortgage Rates: Lenders priced in a stable BoE rate, and fixed-rate mortgages dropped to 4.3–4.6%, boosting approvals.

First-time Buyers: Benefited from renewed lender competition and Help-to-Buy-style regional schemes, though deposit affordability remains a concern.

Cash Buyers: Accounted for 36% of transactions, especially in rural and retirement segments.

Commercial Property Market

Prime Stock Demand: Best-in-class (Grade A, ESG-compliant) office space in central London and key cities saw rents rise by 1.2–1.5%, with average vacancy under 6%.

Secondary Assets Struggled: Offices lacking EPC B+ or sustainability certifications saw rising vacancies and valuation write-downs of 10–15% YoY.

Flexibility & Amenities: Occupiers demand hybrid work-compliant space with wellness infrastructure, strong transport links, and low energy costs.

Retail Parks Thrive: Retail parks attracted discounters, supermarkets, and health & fitness operators, offering lower rents and parking access.

High Street Winners: Well-located, mixed-use high streets in affluent suburbs or near transport hubs are seeing footfall recovery above 2019 levels.

Investment Landscape, Investor Sentiment

Total Investment Volume: £10.4 billion in Q1, up from £9.5 billion Q1 2024.

Core Buyers:

Middle East and Asia-Pacific investors: Continued appetite for trophy assets and value-add plays.

UK Institutions: Focused on residential, life sciences, and industrial sectors.

ESG Premium: Green-certified buildings command 5–12% pricing premiums, especially in central London.

Financing Conditions

Debt Markets: Lending conditions are improving. Margins compressed to 250–325 bps, with LTVs rising back to 60–65%.

Development Finance: Still cautious, but selective appetite for logistics and life sciences.

Distress Watch: Modest uptick in distressed sales for non-core office portfolios; no systemic stress signals yet.

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