Investors should be targeting Leeds, Manchester, Bradford, Sheffield and Leicester, say experts.
The next surge in UK house prices will happen in the North of Britain, according to housing market analysts.
Estate agent Knight Frank said it expects the strongest house price growth to be in the “more affordable markets in the North” in the coming years, with areas such as the North West, North East, Humber, Yorkshire and Scotland to see a forecast 5% increase in prices in 2025.
Savills said it expects a 4% average rise in house prices across the UK, while Knight Frank forecasts a 2.5% hike overall.
Indeed, Knight Frank predicts a 2.5% increase in property prices in the South West and East of England, while London and the South East will see 3% growth in prices.
Meanwhile, Savills expects 29% growth in house prices over the next five years in the North West, 28% in the North East, Yorkshire and the Humber, and 26% in the West Midlands.
Another tough year for mortgage costs
Analysts say 2025 is likely to be another tough year for the housing market as higher costs make accessing mortgage finance more onerous.
The Bank of England cut interest rates last year to 4.75% and further cuts are expected.
However, recent higher inflation figures have led the Governor of the Bank of England to hint that additional interest rate cuts may be slower than previously expected.
In December, Andrew Bailey told the Financial Times’ Global Boardroom conference that the Bank is currently forecasting four 0.25% interest rate cuts this year to 3.75%.
However, commenting on the decision to keep interest rates at 4.75% last month, he said a "gradual approach to future interest rate cuts remains right" and that "with the heightened uncertainty in the economy we can't commit to when or by how much we will cut rates in the coming year."
So where should investors be buying?
The five cities in the UK property investors should be targeting, according to experts at property lettings and investments company Cityrise, are Leeds, Manchester, Sheffield, Bradford and Leicester.
According to Savills, Leeds is already one of the fastest-growing cities for house prices in the region, regularly ranking in the top five UK cities for capital growth.
Indeed, one of the Europe’s biggest regeneration projects is ongoing in Leeds, which should double its size and aims to create 35,000 jobs, according to Cityrise.
Savills estimates that Leeds’ Gross Value Added (GVA) – a metric for measuring the contribution of a company or area to an economy – will increase by 16% over the next 10 years, higher than the expected national average.
Manchester – the ‘powerhouse’ of the north
Manchester has already enjoyed a 33% increase in property prices in the past five years, according to Cityrise, against a national average of 15%.
Average property prices in the city are £234,000, while JLL Residential forecasts rental growth of 21.7% there over the next three years – the highest figure of any city in the UK.
Meanwhile, Sheffield is expected to see property price growth of 20% between now and 2029, boosted by increasing numbers of students attending university there.
Furthermore, Bradford’s turn as 2025 UK City of Culture should boost its investment appeal, while Leicester, which is predicted to enjoy price growth of 23% up to 2028, is already one of the fastest-growing cities in the UK.