Introduction
Political events and policy decisions continue to shape housing markets both nationally and internationally. Over 70 countries held elections last year, with nearly half the world’s population heading to the polls.
Geopolitical tensions, such as the conflict in Ukraine, have had far-reaching effects on global energy prices and supply chains, indirectly influencing construction costs, overall economic stability, and monetary policy in many developed countries.
Throughout 2022 and 2023, central banks across the developed world raised interest rates to combat high inflation. These pressures began to unwind in 2024, allowing both transaction numbers and prices to recover — a trend likely to continue into 2025.
However, affordability remains stretched, and supply constraints continue to underpin prices in many areas. As such, housing is likely to remain at the forefront of political agendas across numerous nations.
The GB Housing Market Today
“The Bank of England raised interest rates from 0.1% at the end of 2021 to 5.25% by the summer of 2023.”
Over the past five years, the UK housing market has experienced three distinct phases shaped by global events and domestic policy.
Before the pandemic in 2020, the market enjoyed stability, with low interest rates fuelling steady house price growth of around 5% per year. Cheap credit encouraged homeowners to upgrade or move to more expensive areas, particularly around London, the Home Counties, and Manchester.
The COVID-19 pandemic transformed housing demand. Lockdowns and the rise of remote working triggered a “race for space”, pushing transactions to their highest level since 2007 — 1.4 million homes sold in 2021.
Competition and limited supply drove prices up 7.2% by the end of 2021 and another 9% in 2022, especially in rural and suburban areas. However, flat values lagged behind.
By mid-2022, global inflation soared, prompting the Bank of England to increase its base rate from 0.1% to 5.25% by summer 2023. This surge in borrowing costs reduced affordability, cooling the market by late 2023 as buyers paused.
Market Recovery and Outlook
Prices fell -2.6% across Great Britain in 2023, reaching the lowest transaction levels in a decade. London and the South were hit hardest.
By early 2025, inflation has nearly returned to the 2% target, and three base rate cuts have brought the rate to 4.5%, with further reductions expected. Combined with high wage growth, this has improved affordability.
By the end of 2024, the average home price in Great Britain rose 3.7%, offsetting previous declines.
Forecasts suggest further growth:
- +3% in 2025
- +3.5% in 2026
- +2.5% in 2027
London is expected to outperform, with an estimated 4.0% increase in 2025, surpassing pre-2022 peaks. However, higher taxation is likely to moderate long-term gains outside Prime Central London (PCL).
Over the longer term, house price growth is expected to align with income growth (~2.5% per year), reflecting a new era of interest rates stabilising around 3%.
House Price Forecasts
| Region | 2024 | 2025(f) | 2026(f) | 2027(f) |
|---|---|---|---|---|
| Great Britain | 3.7% | 3.0% | 3.5% | 2.5% |
| London | 0.0% | 4.0% | 4.5% | 3.5% |
“The new era of interest rates, in which the base rate will likely be around 3%, will moderate house price growth.”
The International Market
Interest rates have shaped housing markets worldwide. Both the European Central Bank (ECB) and the Federal Reserve (Fed) began cutting rates in 2024, with more reductions expected in 2025. Lower lending costs have brought buyers back to European markets, especially in Germany, France, and the Netherlands, where limited supply continues to push prices upward.
In the United States, economic growth has remained strong, bolstered by political stability under Donald Trump’s return to office. However, sticky inflation has kept the Federal Reserve cautious about further rate cuts.
House prices in both the UK and USA followed similar patterns — declining in 2022–2023 before recovering in 2024. In the U.S., the average home price increased 4.5% last year. Fixed-rate mortgages discourage movement, as homeowners are reluctant to give up their low rates until borrowing costs fall further.
In the Middle East, limited reliance on finance has helped maintain upward price momentum. Favourable tax treatment in the UAE continues to attract international professionals as Western nations increase taxes to fund post-pandemic spending and curb inflation.
Dubai’s Strong Performance
Foreign demand has driven a rebound in property values. Dubai’s prices rose 19.3% in 2024, outpacing most other developed markets.
A consistent challenge across global markets has been low housing supply. Disrupted supply chains and higher energy costs have made construction increasingly expensive. Many developers have paused projects, waiting for demand recovery — placing a floor under prices, particularly in the mid- and lower-end segments.
International Migration Patterns
To understand these trends more deeply, Hamptons surveyed over 3,500 buyers outside the UK to identify key motivations and challenges behind international property purchases.
Buyer Motivations
The top three reasons for international purchases were:
- Lifestyle improvement
- Holiday home ownership
- Retirement planning
Three-quarters of respondents were motivated by lifestyle or holiday aspirations. UK buyers favoured Southern Europe, while U.S. buyers leaned towards the Caribbean.
Tax efficiency ranked higher among buyers in the UAE and Jersey, where low tax regimes have attracted affluent households since other nations increased rates post-COVID.
However, taxation and investment ranked lowest globally as motivators in 2024.
Buyer Challenges
Financial barriers topped the list of difficulties, as global mortgage rate rises made borrowing more complex and costly — especially for those earning in foreign currencies.
| Rank | Importance | Challenge |
|---|---|---|
| 1 | Lifestyle | Finances |
| 2 | Holiday home | Visa |
| 3 | Retirement | Tax |
| 4 | Family | Geo-politics |
| 5 | Taxes | Bureaucracy |
| – | Other | Investment / Prices / Brexit |
Biggest International Purchasers
| Location | Buying In From |
|---|---|
| Andorra | UK |
| Aruba | America |
| British Virgin Islands | America |
| Curaçao | America |
| Cyprus | UK |
| Dominican Republic | America |
| France | UK |
| Greece | Middle East |
| Italy | Germany / France |
| Jersey | UK |
| Mauritius | South Africa |
| Oman | Iran |
| Portugal | UK |
| Sint Maarten | America |
| South Africa | UK |
| Spain | UK |
| United Arab Emirates | Vietnam |
| United States | Italy / Lebanon |
| US Virgin Islands, USA | Canada |
Additional Insights
In Western Europe, finances were less of a concern compared to other regions. Lifestyle-oriented purchases dominated, with many buyers paying in cash, particularly across the Caribbean and Africa.
Visa restrictions ranked as the second most common challenge, particularly in Spain, Jersey, and Greece, where Brexit has complicated access for UK citizens.
Before 2016, language barriers were a primary obstacle when purchasing abroad. Today, significant financial thresholds (often six-figure euro transfers) are required for long-term access, especially under the 90-day rule in EU countries.
Regional Trends
- UK buyers continue to dominate European markets despite Brexit, often sticking to nearby countries.
- U.S. buyers are most active in the Caribbean islands.
- Retirement destinations like Spain and Greece face growing visa and residency barriers.
Looking ahead, international buyers are likely to face increasing restrictions as more countries phase out or raise the cost of Golden Visa programmes (e.g., Greece and Spain). Meanwhile, nations like the UK are tightening tax rules for non-resident buyers and increasing levies on foreign-owned property.
These changes will not deter those relocating for work or family, but they may limit access for discretionary buyers — particularly retirees or those seeking holiday homes.
Disclaimer:This report is for general information only. Hamptons accepts no responsibility for loss arising from use of its content. Data and forecasts are for informational purposes and not investment advice. Reproduction without written consent from Hamptons International is prohibited.