Global growth is slowing.
UK growth is facing hard headwinds amid the US anti-globalist stance. The economy grew under one per cent in 2024. This year the expectations were higher, but the latest OECD report and the BoE calls forecast a lagging economic growth. It could be 0.75 per cent and 1.2 per cent growth in 2025 and 2026, respectively. In any case, economic growth is not lifting the heavy work in the UK.
The spring statement on March 26 will address new measures on the economy before the new tax year in April. The government is squeezed between the household income and the budget deficits. And now, the conversation has shifted to rising defence spending in Europe. What next after the US divorce from the EU? Should governments allocate much-needed finances to an army of military showrooms? It seems like they do.
Inflation and interest rates are reluctant to cool down in 2025.
House prices and market activity rose before the stamp duty tax changes in April. However, the purchasing power of new buyers is weakening. Rightmove data reveals that there is a record number of sales tags in the housing market where the buyers do have the upper hand. The average house price in the UK tops GBP 298k, according to the data released by Halifax earlier this month. The average house price rose by 2.9 per cent annually (where the interest rates were above 4 per cent.)
The unemployment threat is a serious question mark for the British corporate workforce. Companies are stuck with the tech revolution and slow-growth economies. The knowledge workers and office staff are the most impacted crowd in the workforce. Large redundancies are imminent in this new tech-oriented, slow-growth corporate global outlook. Even if this gloomy outlook is the worst-case scenario, households could sit tight and avoid spending as much as they could.
The Labour government has not been delivering on the promised housing campaign. The 300k houses yearly building target looks like a number only. The activity does not match this number so far. There are not enough projects and builders. How the government will ignite the new building streak amid a tax-heavy budget, relentless bureaucracy and lack of skills is a million-dollar question.
Mortgage rates are higher than expected.
The last quarter of 2024 was promising for the UK properties. Lending rates were easing down, and buyer demand was rising. 2025 was expected to be a strong year for real estate activity and the much-needed building boom. After 6 months of cheers in the housing market due to the delayed demand, we will end the first quarter of 2025 with a weakening outlook and a lot of question marks.
While all these challenges persist, the ongoing shortage of housing supply coupled with sustained demand in the UK suggests that property prices will continue to rise this year, albeit at a slower pace compared to 2024.
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