Even before Donald Trump sets foot back in the White House for his second term, the impact of his political and economic agenda is already reverberating across the Atlantic — notably within the UK housing market.
Uncertainty around Trump’s fiscal stance and growing inflation expectations in the US have pushed up global borrowing costs, leaving their mark on UK mortgage markets. The five-year SONIA swap rate — a key measure used to price fixed-rate mortgages — surged from 3.4% in September to 4.3% by mid-January. That sharp jump has added further strain to affordability and drawn political scrutiny towards Chancellor Rachel Reeves’ fiscal strategy, which has included higher levels of public borrowing and spending.
Despite these challenges, property experts see opportunities for those prepared to act decisively. James Cleland, head of Knight Frank’s Country division, says conditions may be more favourable than they appear: “For those who can filter out the noise of recent weeks, it’s actually a smart time to buy. The quality of stock on the market is high, and most vendors recognise the headwinds facing buyers. The alternative is to wait several years for a potential change of government, by which time prices could be 15% higher than they are today.”
Knight Frank projects that UK country property prices could grow by 17.6% by 2029 — an encouraging sign for those taking a longer-term view.
Shifting dynamics across the market
According to the Country House Price Index, prices dipped by just 0.3% in Q4 2024 — an annual decline of 0.9%, the shallowest fall since early 2023. While prices remain under pressure, there are key trends emerging:
• Urban vs rural: Townhouses proved more resilient, falling by just 0.5% in 2024 compared to a 3% drop for farmhouses. Urban buyers driven by necessity remain active.
• Luxury market softness: Properties priced above £5 million saw greater declines (–1.8%) than those in the £500,000 to £1 million range (–0.9%), reflecting shifting sentiment even among cash-rich buyers.
2025: short-term pressure, long-term potential
In the months ahead, elevated mortgage rates are expected to continue to constrain affordability. However, the looming stamp duty increase in April 2025 may spur a short-lived uptick in activity, as buyers seek to transact before the change.
Further out, market pressures could ease if — as widely expected — the Bank of England cuts rates twice in 2025. Such moves would offer welcome relief, particularly for the mid-market segment where borrowing constraints bite deepest.
Relative value in the countryside
Since 2009, country property prices have risen by just 18%, compared with 45% in prime central London and 75% in the broader UK market (according to the Nationwide index). This underperformance suggests pockets of relative value remain in regional and rural markets — especially for buyers with a long-term perspective.
While the pandemic-fuelled ‘escape to the country’ trend has now largely run its course, economic and policy developments may bring renewed attention to the regions. New non-domiciled tax rules arriving in April could inject capital into the prime end of the country market, creating further resilience.
As Cleland notes, buyers willing to lean into the current uncertainty could stand to benefit significantly from future growth — even as the political and economic backdrop continues to evolve.
