The year ahead will be a “buyer’s market” with house hunters having more negotiating power and sales picking up, experts have predicted.

But more bullish expectations for 2025 are also tinged with caution, with a key stamp duty discount set to end in the spring, and uncertainty hanging over the wider economy and the speed of future potential interest rate cuts.

Tim Bannister, a property expert at Rightmove, said: “We’re anticipating a stronger 2025, with higher price growth and more transactions than in 2024.”

He continued: “The year ahead is not without some caution.

“We think 2025 will continue to be a buyer’s market, which could provide buyers with more negotiating power, given the number of available properties per estate agent is at a decade-high for this time of year.

There is some uncertainty about what happens when stamp duty rises from April 1, as well as ongoing geopolitical tensions and the trend of inflation

“There’s less competition amongst buyers than during the pandemic markets, which could provide them with some breathing room to choose the right home at the right price.

“However, if the right property does come along, we wouldn’t advise waiting too long, as agents tell us that attractive homes, well-priced and in popular areas are still being snapped up quickly. Additionally, falling mortgage rates, which we expect to drop to around 4% by the end of the year, should improve affordability and sentiment.”

Mr Bannister said 2025 could also start to mark a house price resurgence for London, “driven partly by some major companies mandating a return to permanent office working”.

He also said the picture could be mixed for homeowners who are due to remortgage in 2025.

About 1.8 million fixed-rate mortgages are due to end in 2025, according to figures from UK Finance.

Mr Bannister said: “On one hand, there will be people rolling off a five-year, fixed-rate agreed during the pandemic frenzy, and will likely be facing higher costs.

“On the other, there will be those who fixed for two years at the post-mini-budget peak, who come to the end of that deal and find themselves with lower costs.”

He added that while “the outlook is positive for 2025 … there is some uncertainty about what happens when stamp duty rises from April 1, as well as ongoing geopolitical tensions and the trend of inflation.”

Stamp duty applies in England and Northern Ireland, and a temporary “nil rate” band for first-time buyers, which is currently £425,000, is set to return to £300,000, from April 1.

Lucian Cook, head of residential research at property firm Savills, said: “First-time buyer activity is expected to be front-loaded in 2025 as these buyers rush to beat the end (of) stamp duty concessions in March.”

He predicted that potential home movers who have previously been holding back due to a harsher mortgage rate environment will return.

This is likely to be initially driven by needs-based buyers, with more movers returning as mortgage rates edge down, he suggested.

The proportion of cash buyers is also expected to drop back, he said, adding: “Opportunistic buyers that have benefited from the weaker market of the last two years will be squeezed out by increasing numbers of mortgaged owner-occupiers.”

Mr Cook said: “The direction of mortgage rates has been key to buyer decisions over the past two years, and decreased monthly mortgage costs are now feeding through into improved confidence amongst prospective buyers, prompting the moderate house price growth we have seen over the past few months.”

Mr Cook also predicted the housing market could see “some residual impact of the unwinding of the race for space in 2025, bringing growth in the South West and East of England below that of the capital”.

Decreased monthly mortgage costs are now feeding through into improved confidence amongst prospective buyers

The race for space was seen during the coronavirus pandemic, when the housing market saw strong demand for properties located in more rural and coastal locations.

Mr Cook also said housing market activity in the prime sector could lag behind the wider market.

He said: “In a normal housing market recovery, you would expect the top end of the market to recover first, responding quickest to a change in sentiment.

“However, the additional stamp duty surcharge for second homes, changes in non-doms taxation and VAT on school fees are likely to offset some of the impacts of future cuts in interest rates this time around, meaning that prime market activity will lag behind the mainstream.

“The markets of prime, central London are most directly affected … but, the outlook is somewhat brighter in the prime markets outside of London.

“Prime, regional markets, in particular, are likely to benefit from some displaced demand as families look to strike a balance between house prices, commutability, and access to schooling.”

High demand and low supply have been the influence behind the significant rental growth seen over the past few years. At a national level, this pattern looks set to continue

Mr Cook also predicted that a lack of properties will continue to push up rental prices.

He said: “High demand and low supply have been the influence behind the significant rental growth seen over the past few years.

“At a national level, this pattern looks set to continue with rents expected to rise above incomes again, especially as it is difficult to see where an increase in rental supply will come from in the next couple of years.

“As a result, we have forecast that rents will rise a further 4.0% in 2025 – outpacing income growth.

“But, strong rental growth has stretched the finances of those living in the rental sector, limiting the capacity for further increases in some markets.

“In particular, slower rental growth through 2023 has led to a slight easing of affordability pressures in London. We expect that this trend will continue in the near term with rental growth of 2.5% in London in 2025, against income growth of 2.9%.

“However, we do expect to see more affordable markets in the North, where mortgaged buyers are under less strain, to see the strongest acceleration in growth beyond 2025.”

We expect rents for new lets to rise by 4% over 2025

Richard Donnell, executive director at Zoopla, said: “The unaffordability of home buying has been one factor behind a 27% increase in rents over the last three years, outpacing the growth in earnings over the same period.”

He continued: “We expect rents for new lets to rise by 4% over 2025 and by 10% over the next three years – the impetus for growth will come from areas where renting is more affordable, like Rochdale, Burnley and Newcastle.

“Rental inflation will be weaker in the most expensive markets where rents have risen the most in recent years, which covers London and the major cities.”

Zoopla predicts that stamp duty changes will have a particular impact in southern England, where house prices are often higher.

Banking and finance industry body UK Finance has said it expects to see a gradual improvement in mortgage affordability in 2025, feeding into market growth.

As interest rates tick down, it also expects mortgage arrears to fall. The number of customers falling behind on their mortgages looks to have peaked early in 2024 before falling back, according to the body.

Lending to home buyers is forecast by UK Finance to increase to £148 billion in 2025, up by 10% compared with 2024.

But, while UK Finance is predicting a continued steady growth in both house purchase and remortgage lending as affordability improves, it does expect to see a fall in buy-to-let (BTL) lending in 2025.

As the sector continues to adapt to meet cost and taxation challenges, UK Finance expects new BTL purchase lending to stand at £9 billion in 2025, down 7% compared with 2024.

Nationwide Building Society expects to see house prices increase by 2% to 4% in 2025.

Halifax, meanwhile, has predicted modest house price growth in the range of 0% to 3%.

Property professionals’ body Propertymark said: “It remains paramount to ensure there is a sustainable mix of properties available and in targeted areas where there is greatest need.”

Estate agent Jackson-Stops said upsizing families and downsizing retirees are expected to continue driving sales over the year ahead.

But it said lengthy transaction times remain a challenge, with the time between an agreed sale and an exchange of contracts averaging more than three months in some markets.