Is Now a Good Time to Invest in Property in the UK?

A Growing Population Leading To a Growing Demand

One of the most significant factors that will widen the gap between supply and demand in the UK housing market is the country’s rapidly growing population. The UK continues to attract global talent, not only due to its thriving business sector but also its world-class educational institutions. This makes it an increasingly popular destination for those overseas.

By 2035, the UK population is projected to reach 74 million, representing a 9.9% increase over just 15 years. This population growth will naturally lead to a rise in demand for rental properties, creating compelling opportunities for property investors. 

While younger professionals still represent the largest group of tenants, there’s a notable rise in the number of people aged 50 and over entering the rental market. This demographic change, driven by factors such as downsizing properties and lifestyle choices, is creating increased demand for a wider variety of property types.

For investors, this demographic shift offers an opportunity to diversify portfolios and meet the changing needs of tenants. The evolving rental market highlights the UK’s continued attractiveness as a stable investment destination.

Businesses Attracted to the UK

Traditionally, London has been the go-to choice for international companies. However, the rise of cities in the North, driven by factors such as lower operational costs, strong regional growth, and government-backed initiatives, is leading to a shift in business activity. As a result, demand for office space outside of the capital is soaring, presenting a significant opportunity for property investors in these regions.

MediaCityUK in Manchester is a prime example. Once a derelict dock area, MediaCityUK has been transformed into a thriving digital media hub. Since its opening in 2012, the 53-acre site has become home to major players like the BBC and ITV, as well as 250 creative businesses and the University of Salford. 

For investors, this increasing inward investment signals a wealth of opportunities across the UK, where a booming business landscape is driving demand for both commercial and residential property in the UK. 

Long-Term Capital Growth for Property in the UK 

The UK property market is expected to see consistent growth over the next five years, with property prices forecasted to rise steadily year-on-year. For 2024, experts predict a modest increase of 3%. There is expected to be further gradual gains of 2.5% by the end of 2025, 3% in 2026, 3.5% in 2027, 4% in 2028, and 5% in 2029. This long-term trajectory reflects a positive outlook for property investors, signalling an environment subject to capital appreciation.

These growth rates may appear moderate, but they highlight the UK’s resilience as a stable and reliable market for property investment. The forecasted price increases suggest that investors can expect a steady rise in property values, offering the potential for solid returns over the coming years. While the pace of growth may not be explosive, the stability and predictability of the UK market make it a strong contender for investors seeking long-term, sustainable returns.

Looking forward, experts predict that rental prices will increase by 3-5% annually over the next year, providing buy-to-let investors with rising rental yields and a steady stream of income. By the end of 2024, rents are expected to have risen by around 8% year-on-year. While rental growth is expected to slow down from 2025, the forecasted rates remain above historical averages. 

Knight Frank anticipates 4% growth in 2025, followed by steady increases of 3.5% in both 2026 and 2027, 3% in 2028, and 2.5% in 2029. Over these five years, cumulative rental growth is expected to reach an impressive 17.6%.

For investors, this means not only a healthy rental income but also the potential for strong long-term capital gains, making buy-to-let property in the UK a compelling investment opportunity.

The Impact of Base Rates on Mortgage Costs 

The Bank of England’s recent decision to lower the base rate to 4.75% came after the UK inflation dropped below the Bank’s 2% target for the first time in over three years. Signalling a potential shift towards more stable economic conditions. For property investors, this is an important signal that borrowing costs could gradually ease, though the landscape remains dynamic.

In the months following the base rate cut, mortgage rates saw some minor relief. Between September and October, the average two-year fixed mortgage rate dropped from 5.56% to 5.4%, while the average five-year fixed rate fell from 5.2% to 5.07%, according to Moneyfacts. 

However, in October, some of the larger lenders raised rates again, with the average two-year fixed rate climbing back to 5.5%. This fluctuation underscores the importance for property investors to remain on top of the market. Mortgage rates can change quickly in response to both base rate adjustments and broader market conditions.

Looking ahead, the outlook for mortgage rates appears to be relatively stable in the near term. Zoopla predicts that mortgage rates will likely remain close to current levels throughout 2025, excluding any unexpected economic shifts.