Knight Frank cuts 2025 UK house price forecast as supply surge and pre‑Budget nerves weigh

Knight Frank has downgraded its forecast for UK house price growth in 2025, saying average prices will rise just 1 percent this year — a marked revision from a 3.5 percent projection issued four months earlier. The upmarket estate agent pointed to an oversupply of homes and weak buyer confidence, exacerbated by speculation over fiscal measures ahead of the autumn Budget, as reasons for the weaker outlook.

The firm said the imbalance between supply and demand has remained pronounced, driven by a hangover of stock from the April stamp duty cliff edge, listings delayed from 2024 because of the general election, and an increasing number of landlords selling in response to tougher regulation. Knight Frank reported that new prospective buyer numbers were 8 percent lower in the year to August compared with the previous 12 months, while new sales listings rose 6 percent over the same period.

The revision is not uniform across the market. Knight Frank said prime central London prices — covering the City of Westminster, the Royal Borough of Kensington and Chelsea and parts of Hammersmith & Fulham and Camden — are expected to finish 2025 about 4 percent lower than at the start of the year. Prime properties outside London, defined by the firm as those valued at £750,000 or more, are forecast to fall by about 5 percent in 2025.

"The laws of supply and demand are applying a strong gravitational pull on property prices," said buying agent Jonathan Hopper, chief executive of Garrington Property Finders. Hopper added that higher‑value purchases are often discretionary and many buyers are taking a "wait and see" approach amid rumours of major tax changes ahead of the Budget, which tends to suppress offers and make the market more price sensitive.

Political and fiscal uncertainty is a key factor cited by agents. With the Government constrained on spending ahead of the 26 November Budget, the market has been subject to intense speculation about potential measures targeted at high‑value assets. Knight Frank and other advisers have flagged proposals such as the scrapping of non‑dom tax rules and increases in additional stamp duty rates as risks that could further deter demand at the top end.

Mortgage costs are also constraining activity. Although the Bank of England has cut interest rates three times since the start of the year, most mortgage fixed rates have not fallen to the same extent because they are priced off SONIA swap rates and expectations for future rates. As a result, fixed mortgage pricing remains materially higher than the 1–2 percent deals available before 2022, limiting borrowers' ability to stretch on price.

Looking beyond 2025, Knight Frank expects a modest recovery. Its projections show average UK prices rising about 2 percent in 2026 and, over the five years from 2025 to 2029, cumulative growth of 18.7 percent nationwide. The firm anticipates regional variation: Greater London prices are forecast to rise about 14.8 percent over that period, prime central London to rise 10.1 percent, and high‑value country homes to gain around 8.5 percent.

The short‑term market is expected to be particularly sensitive through the autumn as sellers and buyers reassess positions ahead of fiscal announcements. Agents said deals continue to be completed but that pragmatic pricing is essential; in areas where sellers outnumber serious buyers, discounts and other incentives, such as contributions toward stamp duty, are increasingly common.

Mortgage advisers and lenders recommend buyers and those approaching the end of fixed‑rate deals to compare options and seek broker guidance early. Borrowers can often secure a rate in advance — typically six to nine months before a deal ends — though fees rolled into a new loan will attract interest over the term. Buy‑to‑let landlords, especially those on interest‑only mortgages, may face larger jumps in monthly costs and are urged to plan remortgaging well ahead of expiries.

Knight Frank's revision underscores a broader market recalibration as residual supply from previous tax‑induced activity, election‑related listing delays and regulatory changes collide with cautious buyer behaviour and mortgage pricing that has not yet reflected central bank easing. Policymakers' decisions in the coming weeks and months, and how markets price those outcomes, are likely to determine whether prices stabilise or face further near‑term downside.