MARKET UPDATE
UK property market update for may 2025
June 02, 2025 • Author: George Radford
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May, traditionally, a transitional month. In the Northern Hemisphere, a time of warmer weather and longer days; in the Southern Hemisphere, shorter days and an edge towards winter, and so too May is proving a transitional month for the biome that is the UK property market, albeit one that is more Northern than Southern Hemisphere. In the financial markets, we’re finally seeing signs of sunshine, but the major UK news story captivating us this month was that the world’s oldest person, Ethel Caterham is alive and kicking in the prime Surrey commuter belt at the grand old age of 115!
Wow, we thought, one-hundred-and-fifteen! And then our collective awe and admiration gave in to slight panic at the thought of funding a potential FIFTY YEAR retirement until, gathering our senses, we realised we were in exactly the right kind of industry to fund us into our sunshine years because UK property investing is one of the best retirement strategies. In this month’s market update we’re looking forward to the long-term, to give our clients and would-be investors a healthy dose of perspective to plan and manage investment property purchases that can build a resilient UK property portfolio to last the ages – and keep you in clover.
If the numbers work now for you, they’ll work even better in the future
Looking back over the last few years, property investors are allowed a moment to congratulate themselves; inflation over 10%, mortgages at nearly 7%, punitive tax measures – how did we cope? The hard truth is, if you have been able to make the numbers work for you over the last two to three years, then you’re in a good position and the numbers can only get better. As we alluded in the opening, we’re seeing signs of full sun in the financial markets: Another Bank of England base rate cut down to 4.25% (with dissension in the ranks that the cut should have been bigger apparently); inflation at 2.6% and average mortgage rates at 3.72% led to Knight Frank bullishly readjusting their house price forecasts.
The leading agency revised their five-year forecasts (2025-2029) up to 22.8% for the UK average and up to 19.9% for Prime Outer London. “The more favourable rate environment will underpin demand and prices in the needs driven markets of prime outer London.” Rental forecasts also jumped significantly too, with prime outer London rents expected to increase by over a fifth, 20.5% by 2029.
Banks are recognising the need for more flexible lending
Recognising the tough economic climate facing buyers, May also saw the reintroduction of the 100% mortgage with 10 and 15-year terms for those with good credit and reliable incomes, in the same month where data showed that only 1 in 10 people under the age of 44 could afford to buy a first home. To go back to good ol’ Ethel, average house prices in 1930, (when a 20-year old Ethel may have been considering buying a house) were £520. Adjusted for inflation, in today’s prices that’s £43,000 to £45,000 – showing just how much lower house prices were relative to incomes.
Prices, still, seemingly continue to rise despite the Stamp Duty hike, our eyes took in more sensational headlines this month testifying that house prices had grown by 0.6% taking the average UK house price to a record high of £379,517. Yet what the papers don’t report, and which investors know, is that when adjusted for inflation, most UK house prices (perhaps not in the North West), have declined, which is why landlords are feeling the pinch and may be forgiven for feeling that they’ve been gaslighted when the newspaper headlines of record price increases weren’t tracking with their bottom lines. But, breathe easy, as bottom lines are improving which means more marginal gains for investors towards the end of 2025 and beyond. “Bottom’s Up” indeed.
If you bought today, what might you expect in 25 years?
If you bought a house in the UK today and kept it for 25 years, the return you could expect depends on several variables. However, we can give a realistic estimate based on historical trends, average house price growth, rental income and inflation.
Sample Case Study: 25-Year UK Property Investment Potential
Costs to Factor In
Stamp duty
Maintenance and repairs
Letting/management fees (if rented)
Insurance, legal fees
Mortgage interest (if applicable)
Capital Gains Tax (if not your main home)
Even with good returns, inflation eats into value. If inflation averages 2.5%/year, your property would need to double just to maintain real value.
Summary: What You Might Expect
25-Year UK Property Investment Returns
Aha! But, how best to buy a UK investment property?
The majority of our investors make cross-border transfers to buy UK property, which is why on 5th June we’ll be participating in a webinar alongside Capitex to help our clients understand the benefit of FX when making international payments and the thousands investors can save when they know how to make the best currency play for them.
Using foreign exchange (FX) trading—or more broadly, managing currency risk through FX tools—can be highly advantageous when buying investment property, especially if you're dealing with different currencies. Here's how it can be beneficial:
1
Hedging Against Currency Fluctuations
If you're buying a property in a foreign country or using foreign currency to fund the purchase (e.g., you're a UAE investor buying in the UK), FX rates can significantly impact your cost. A small movement in exchange rates can add thousands to your purchase price. Use FX tools like forward contracts to lock in an exchange rate months in advance which creates better budget certainty and protection from adverse rate movements.
2
Strategic Timing for Better Rates
If you're flexible on timing, FX trading allows you to monitor and capitalize on favourable rate movements to convert your money when rates are best. If GBP strengthens against EUR, you can convert more euros for the same amount of pounds, effectively making your euro-denominated property cheaper.
3
Boosting Returns on Foreign Rental Income
If you're earning rental income in a foreign currency, converting it back to your home currency at the right time can maximize income. An active FX strategy = Better conversion rate = Higher effective yield. You could also use FX options to protect against downside but keep upside.
4
Diversification and Arbitrage
In some cases, FX volatility can work in your favour when combined with real estate arbitrage
Buy in a country where the property market is undervalued and the local currency is weak relative to your base currency.
If both the property and the currency appreciate, you gain on both asset appreciation and currency revaluation.
5
Financing Advantage
If you're financing the purchase with a loan in a different currency, FX rates will affect repayment amounts. FX management strategies can reduce the risk of rising repayments due to unfavourable exchange rate changes.
Using FX trading smartly can save money, lock in certainty, and even enhance returns when buying property abroad or with foreign currency. It’s especially valuable for international investors or expats, but even domestic investors buying in foreign currency markets can benefit. We hope to see you at the webinar on 5th June to learn more about how you can use FX when buying UK investment property.
That’s it for this month! Do get in touch if you’re thinking of living to 115 and wondering how best to pay for that – we have some ideas!
UK PROPERTY WEBINAR
A Smarter Approach to UK Property and International Payments
On 5 June, RPA Group and Capitex shared practical strategies to help investors fix purchase prices, avoid hidden fees, and boost ROI. Register now to secure your spot and make smarter, more profitable property investments.
Thursday, June 5, 2025 | Zoho Webinar
Choose your session: 1:00 PM or 6:00 PM
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About the author
george radford
Managing Director
George is a co-founder of RPA Group and Managing Director of the business in the UK and Africa. A qualified Chartered Surveyor (MRICS) with almost 20 years of property investment experience, George has helped his clients to successfully grow and strengthen residential property portfolios over multiple markets and territories.
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