March 2025 - London Property Market

Curious about what’s happening in the London residential property market? Well, you’re in the right place! Here’s a quick update on the latest trends and news, this March 2025, from where we're looking. Whether you're thinking about buying, selling, or just keeping an eye on the market, here's a snapshot of what you need to know right now…

INTEREST RATES

​As of March 24th, 2025, the Bank of England's base rate stands at 4.5%. This decision follows a reduction from 4.75% in February 2025, reflecting ongoing efforts to balance economic growth with inflation control. As expected, fixed rate mortgage rates remain static averaging around 4.5 - 5.5%. Oxford Economics continues to forecast a further three cuts from BOE in 2025, bringing the base rate down to 3.75% by the end of the year. On this basis Savills have predicted house prices to increase by 4% in 2025.

The increase in mortgage rates over recent years, combined with the already high property prices in London, has led to reduced buyer demand and a slowdown in transactions. This has caused property price growth to moderate, with some areas seeing stagnation or even slight declines. Additionally, the rental market in London has seen heightened demand, as more people opt to rent rather than buy, driving up rental prices.

If the Bank of England cuts interest rates, it will provide relief to the housing market. Some economists are suggesting a potential fall to 2.5% by 2027. If this forecast proves accurate, it could have significant positive implications for fixed-rate mortgages, with some economists suggesting that mortgage rates might drop back below 4% in the next couple of years.

STAMP DUTY

From April 1st, 2025, significant changes will come into effect for Stamp Duty Land Tax (SDLT) in England and Northern Ireland, impacting both general homebuyers and first-time buyers. For standard residential property purchases, the nil-rate threshold will be reduced from £250,000 to £125,000. The new structure imposes a 0% rate on the first £125,000, a 2% rate on the portion between £125,001 and £250,000, a 5% rate on the portion between £250,001 and £925,000, a 10% rate on amounts between £925,001 and £1.5 million, and a 12% rate on any value above £1.5 million.

For first-time buyers, the relief thresholds are also changing. The 0% SDLT relief will now apply to properties up to £300,000, down from the previous £425,000. Any amount between £300,001 and £500,000 will be subject to a 5% rate, and properties priced above £500,000 will no longer qualify for first-time buyer relief.

Buyers of additional properties, such as second homes or buy-to-let investments, will continue to face a 3% surcharge on top of the standard SDLT rates.

LEASEHOLD AND FREEHOLD REFORM

We are still waiting to hear more news on the Leasehold and Freehold Reform Act 2024 and when/how this will impact lease extension valuations for property owners in England and Wales.

One of the most notable changes is the proposed abolition of marriage value, which will significantly reduce the premium for very short leases. Another important change is the proposal to extend the standard lease extension term from 90 years to 990 years. The reforms have also now removed the requirement that leaseholders must own their property for at least two years before being eligible to apply for a lease extension. Ground rents will continue to be reduced to zero, commonly referred to as a "peppercorn rent," when a lease is extended.

Although these headline reforms have been outlined, further details on calculation methods and other specifics are expected to be confirmed following a government consultation scheduled for summer 2025. Once secondary legislation is implemented, the full financial implications on lease extension valuations will become clearer and we will update you accordingly.

For leaseholders, the reforms present a key consideration, whether to proceed with extending a lease under the current rules or to wait for the new legislation to take effect. This decision will depend on individual circumstances, including how many years are left on the lease and the current ground rent obligations. In particular, leaseholders with leases above 80 years may not wish to risk the possibility of having to pay marriage value incase the changes are not implemented, whereas those already below 80 years may prefer to wait, as they could potentially avoid paying marriage value if the reforms are implemented.

Overall, the proposed leasehold reforms are designed to make lease extensions more affordable and accessible, though leaseholders should remain informed as the implementation process progresses. Please do get in touch if you would require further advice on this.

THE LONDON GROWTH PLAN

On February 27th, 2025, the Mayor of London unveiled the London Growth Plan, a 10-year strategy aimed at boosting the city's economy and improving residents' well-being. The plan targets a 2% productivity growth per year from 2025 to 2035, potentially adding £107 billion to London’s economy and increasing average pre-tax income by £11,000 per Londoner.

A key focus is inclusive growth, with the goal of raising the real weekly income of the lowest-earning 20% of households by 20% by 2035, benefiting at least one million households. The plan also prioritises sustainability, aiming for net-zero emissions by 2030, while positioning London as a leader in green finance and innovation.

To maintain global competitiveness, the plan aims to foster growth in sectors like artificial intelligence, life sciences, and cleantech. It includes infrastructure projects such as extending the DLR to Thamesmead and the Bakerloo line to Lewisham, and aims to build 377,000 homes and create over 150,000 jobs by 2028.

Overall, the London Growth Plan seeks to drive sustainable and inclusive growth, ensuring that London remains a leading global city while improving the lives of its residents.

GLIDING THROUGH CHAOS

Despite continuing global uncertainty, the UK housing market remains resilient. National house prices rose by 0.1% in January 2025, according to Nationwide, and transaction volumes also improved in 2024, with sales almost back in line with the pre-pandemic average by the end of the year.

In London the average price of a home remains broadly unchanged from the previous year, but the market feels buoyant. We are in conversation with local agents and stakeholders, who are all reporting a steady flow of new instructions, despite the recent stamp duty changes.

Experts predict a recovery in market activity as the Bank of England's base rate potentially decreases, improving the mortgage scene. However, challenges remain, especially in the prime central London sector due to tax affecting second homes and non-domiciled individuals. Here at LPS Advisory we are cautiously optimistic that London’s property market is rebounding, with rising sales, strong rental demand, and renewed buyer confidence driving future growth.