ESPC CEO shares predictions on the 2025 property market

Paul Hilton, CEO of leading Scottish property portal ESPC, shares his insights into what he thinks will happen in the housing market in 2025.

2024 was certainly an interesting year for the Scottish property market. After a tumultuous extended period for almost everybody’s finances following the ill-fated Truss government and the subsequent cost-of-living crisis, the market picked up spectacularly towards the second half of the year, and at ESPC we saw huge increases in both property listings and importantly, property sales, as buyers and sellers alike took their opportunity to make moves up the property ladder.

It just goes to show that we can never be truly sure of what will happen; we expected to see a drop in volumes across the board, and mortgage interest rates to drop in May, neither of which were the case. However, we were correct in our thinking that more properties would begin to come onto the market, and buyers would be able to secure them for much closer to the Home Report valuation, which has certainly been the case throughout 2024 (currently buyers are paying around 102% of the Home Report valuation on average).

On that note, it’s an excellent time to look ahead to what I think may be in store for us in 2025, assuming that there are no significant escalations in the conflicts around the world which could, of course, drastically impact much more than just the housing market.

I do have concerns regarding recession and stagflation; there is a world where inflation does increase a fair bit, as businesses try to pass on the rises in minimum wage and National Insurance contributions brought in by the most recent UK Government’s Budget. This could unfortunately be bad news for the economy, as prices rise while money remains tight for the average consumer – all of which isn’t exactly good news for the property market.

However, I do believe we will see some further reductions to interest rates in 2025. How low they could go is difficult to call; the uptick in inflation, and some of the measures introduced in the UK Budget will have some inflationary pressure.

In terms of the property market itself, I think we will continue to see a healthy supply of stock coming onto the market, which is great news for prospective buyers and those thinking about moving home in 2025. I don’t think that the levels will quite reach what we’ve seen in 2024, but that depends on inflation and the overall economy; it’s more likely that people will choose not to act if there is major economic uncertainty, and if they are able to wait it out, it’s more likely that they will.

I predict that property sales will continue to be strong, although again, the levels reached will all depend on how the public feel about the economic environment. Sellers have become very accepting of the general reduction in the premiums paid over and above Home Report valuation for their properties, after years of being able to command anything between 10-20% as standard, which means that they’re more likely to act in the moment and list their properties when they feel the time is right for them, rather than waiting an indistinct amount of time for the market to improve, as such. The rise in available stock also means more competition for sellers, but again, homeowners do seem to be at ease with this and are choosing to be confident in the property market anyway – something I do hope we’ll continue to see in the months to come. We’ve certainly seen huge upticks in the numbers of homeowners choosing to list their properties for ‘offers over’ rather than at a fixed price, which suggests strong faith in their home’s ability to secure a ‘good’ price at sale.

The introduction of VAT to private school fees is highly likely to drive larger sales volumes in the catchment areas of the top-rated schools, especially in Edinburgh where these locations are already hugely competitive. It remains to be seen just how much of an impact this will have as we draw closer to the start of the next school year and application deadlines.

In 2024, we saw strong levels of activity from first-time buyers, which I believe was partially fuelled by the stagnation of the rental market; an ongoing lack of stock alongside high rents could be the reason for many would-be tenants to decide to take the leap and buy a home instead, especially now the base rates have been lowered. It is my belief that if the lettings market continues in the same vein in 2025, we’ll continue to see more young people taking their first steps into the property market and purchasing their first homes. It would be fantastic to see some Government support coming into place for first-time buyers in 2025, but unfortunately, I think this appears unlikely at this stage. Any support that is introduced is likely to be heavily oversubscribed which means many would miss out.

If we turn the page to lettings, this area of the housing market is trying to find its level at present. Since the rent caps were lifted back in April, we have seen an increase in rents and in some cases, these increases appear to have deterred tenants – so there’s something of a stand-off between what landlords want for their properties and what tenants can afford or are willing to pay. The recent introduction of the higher rate of Additional Dwelling Supplement is almost certain to negatively impact the lettings market in terms of preventing more landlords entering the sector, which is likely to again increase rents as demand will outstrip supply. We are seeing daily the impact of the Housing Emergency and the shortage of available homes, and it is my firm belief that this action will only limit the amount of rental properties becoming available to tenants.

Despite my expectations that there may be a few hurdles or difficulties along the way, I do firmly believe that Edinburgh and its surrounding areas, especially Dunfermline and the more affordable towns and villages of East Lothian and Midlothian, will continue to attract extremely strong interest from buyers, not just in Scotland but further afield too.