Emile Salame is the founder of Cornerstone Asset Advisors, a London-based independent real estate consultancy company. This article will look at real estate in the UK, particularly in the capital, featuring expert predictions for market movements in 2025 and beyond.
CBRE looked back and evaluated its expectations for the UK property market in its 2025 UK Real Estate Market Outlook Mid-Year Review. Earlier in the year, the economic environment had started to stabilise, with inflationary pressures receding. The 2024 general election and budget announcements established new agendas for the UK, positioning the country to move forward with certainty and focus, CBRE suggested in its review.
The first half of the year saw a slight increase in inflation, which CBRE predicted would peak in the summer. In spite of this, price stability persisted, with consumer activity showing positive signs in the form of rising retail sales despite a slowdown in wage growth. Experts anticipate that consumption will continue to drive growth with falling inflation and further interest rate cuts by the Bank of England later in 2025.
Government spending has increased, albeit without direct investment in the key areas mentioned in Rachel Reeves’ autumn budget. CBRE predicts that progress across a broad range of government initiatives – such as The UK’s Modern Industrial Strategy 2025 and the National Planning Policy Framework – could soon start to become evident.
The UK’s real estate investment market is yet to see full recovery. However, green shoots are emerging through continued capital growth, improved sentiment towards lending and the progression of major transactions. Analysts anticipate an uptick in investment volumes in the second half of 2025 and continued mergers and acquisitions activity in the listed sector. The potential impact on investment from proposals to reform rent reviews does, nonetheless, require further consideration, CBRE suggests.
Despite inflation topping 3%, driven largely by regulated gas price increases, prices have remained markedly more stable than in recent history. Against that backdrop, CBRE predicted that inflation would reach its peak at 3.5% during the summer of 2025. Following the Bank of England cutting rates in February and May, experts predicted three further cuts in 2025 in line with market expectations.
Even in the face of recent market challenges, London remains one of the most sought-after real estate investment destinations on the planet. In 2025, the London real estate market presents both opportunities and risks, with rental yields averaging 4.3% across the capital, though varying significantly from borough to borough and between one property type and the next. Strategic investors focussing on high-yield areas like Barking can easily achieve net returns of 5% plus, while improvements to transport links on the Elizabeth Line continue to fuel appreciation in traditionally overlooked zones.
Requiring budgets starting from £400,000 plus for decent rental yields, the most attractive London property investment opportunities largely lie in the outer boroughs at present, currently offering somewhere in the order of 5% to 6% returns. Tenant demand patterns, regeneration projects and transport connectivity are the primary drivers of long-term real estate value appreciation in London.
The price continues to vary dramatically between location, with outer boroughs like Barking & Dagenham commanding sale prices of £600 to £900 per square foot versus £1,000 to £2,180 per square foot in central locations like Kensington & Chelsea. For a typical two-bedroom property in Barking & Dagenham, however, investors can expect to pay a more modest £400,000 to £700,000, versus £800,000 to £1.5 million in Kensington & Chelsea.
The current London rental yield average currently sits at 4.3% gross. Nevertheless, the landscape has become increasingly polarised between prime and emerging areas. Though top-performing boroughs continue to deliver strong yields, up-and-coming boroughs like Barking & Dagenham lead with attractive 5.2% yields, with the latter areas benefiting from improving transport links, strong tenant demand and regeneration investment that supports rental growth.