As 2025 draws towards its close, it is inevitable to spend time looking back at the year we’ve had, and looking ahead to what might come in the year ahead.
As local people in Herne Hill, we can think about events like the South London Grand-Prix at the Velodrome, the Wide Awake Festival at Brockwell Park, the triumphant return of Boro McCullagh after his epic two-and-a-half-year long cycle ride round the world, as well as a number of new business openings; amongst other things, we have had a delicious helping of several new food and drink related businesses, it seems (and why not!?), from Taylors Green Grocers in Dulwich Village, to 2210 By Natty Can Cook, recently opened on Norwood Road, elevating Caribbean cuisine to Michelin levels (I’m sure it won’t be long!).
As estate agents in Herne Hill… well, somehow thoughts about the year we’ve had don’t seem quite as chipper!
It has been a slog. And a half.
We’ve helped hundreds of people move home here, as we always do – but it has been fraught and stressful and at times downright difficult.
But we’ve got there.
And, having got there, we can finally feel momentum building again. Many experts in fact expect 2026 to be a year of renewed – if measured – confidence for buyers, sellers, landlords and tenants. With the Renters’ Rights Act now on the statute book after months of back and forth, we have clarity in the rental sector at last; and with the Budget now having finally been delivered, neither bringing major shocks nor any sweeteners to talk of, and with interest rates set to fall and inflation forecast to ease, the consensus is for steady price growth, stronger activity and a more predictable backdrop over the next four years.
Starting… now!
The first half of 2025 feels like an almost distant memory! But it was defined by high levels of activity, as people rushed to beat the stamp duty holiday, as well as being tempered by caution, as higher borrowing costs, sticky inflation and political uncertainty weighed on confidence and transaction volumes as we crept into the summer.
The second half of the year has been defined largely by uncertainty – and that, realistically (and without wishing to pin any political colours on the pole) is largely down to the Autumn Budget – or, rather, the speculation that preceded it, which effectively pressed pause on the market. Pushed back late in the year, to November 26, many movers chose to sit tight until they could see how tax and housing measures would land – driven by leaks which fuelled speculation, particularly around stamp duty reform, capital gains tax and a possible wealth tax to be levied on properties worth over £500,000.
Indicators such as buyer enquiries and agreed sales turned negative as the autumn market, which normally springs to life and corrects the slowness of the summer period, failed to come to life – and this was particularly the case in London and higher-value areas like the South East in general – areas that would be most exposed to new fiscal measures on property and rental income.
However, although this may have spelled a period of inertia, it has not collapsed underlying demand.
Chronic undersupply of homes, relatively strong labour market conditions and pent-up demand mean that many households have simply delayed their next move rather than cancelled it altogether. As clarity has returned after the Budget, agents are already reporting that previously stalled transactions are progressing and new enquiries are beginning to pick up even in these two weeks since the Budget announcement, laying the groundwork for a busier 2026.
The major structural change for the lettings sector in 2025 has been – at long last – the passing of the Renters’ Rights Act, described as the most significant shake-up of England’s private rented sector in a generation.
The Act abolishes Section 21 “no fault” evictions, ends fixed-term assured shorthold tenancies and moves the sector to periodic assured tenancies, with implementation beginning from May 2026. It tightens rules on rent increases, bans bidding wars that push rents above asking price and strengthens protections against discrimination, all whilst preserving new possession grounds to ensure landlords can still regain their properties in reasonable circumstances – for example, to inhabit themselves or to sell.
It has caused much handwringing, uncertainty and for many landlords has led to a sense of insecurity – but despite some challenges we will inevitably face during the phasing in period, there is opportunity.
For tenants, it should mean greater security and more predictable rent rises, making it easier to put down roots and challenge poor conditions – something that as an agency we do support.
For landlords, it does raise the bar on compliance and management standards at a time when they are also adjusting to higher taxation on rental income and other regulatory changes, prompting some to reassess portfolio size and strategy. Nevertheless, there are so many good landlords out there who want to provide the best quality housing at fair rents, who have felt undermined by rogue agents and bad landlords for years, and many see this as a chance to level the playing field.
Combined with the ongoing shortage of rental stock for the time being, with new build housing well behind government targets, and very much lacking in SE24, these reforms are likely to keep the lettings market tight. Nationally, rents increased by 5% over the 12 months to October 2025 – the latest figures available from the Office for National Statistics (ONS); in Herne Hill this was significantly higher, with ONS data showing 10.3% increase in the Borough of Lambeth – which also soared above the average rent increase in London as a whole (4.3%). We expect to see solid rental growth and low void periods in 2026, even if the pace that rents increase moderates from that sort of extreme.
The direction of travel for interest rates and inflation is central to the more positive tone emerging as we enter 2026. Forecasters now expect the Bank of England to bring the base rate down into the low-to-mid 3% range by the end of 2026, with mortgage rates falling below recent peaks as a result. Personally, I think it will come quicker than that. In fact, I would be shocked if there isn’t a cut next Thursday, December 18, bringing the rate to 3.75%, and I tend to lean towards there being at least one more cut within the first three months of 2026, or at least by the mid-point.
Inflation is also projected to drift closer to target – one leading reason I believe rates have a good chance of falling more quickly than the end of year prediction. This should ease some of the cost-of-living pressure that has constrained household budgets and borrowing capacity – especially if we do see some sort of peace deal in Ukraine. Of course, any escalation of that conflict could push inflation up again; the forces that combine to affect the housing market are vast, complex and hard to ever fully predict.
In any case, even if inflation and interest rates do drop as we expect them to, it does not signal a return to the ultra-cheap money of the pre-Truss era. Borrowing will become cheaper, but will still remain more expensive than those times, and affordability will still shape what and where people can buy. That said, a move from “rates rising” to “rates easing” is powerful in psychological terms, encouraging would?be movers who have been waiting on the sidelines to re?enter the market and plan ahead with greater confidence.
Many commentators now see 2025 as the low point for activity, with gradual improvement through 2026 as financing conditions become less restrictive.
Putting these threads together, most mainstream forecasters are expecting modest but positive house price growth in 2026, followed by a stronger cumulative rise over the second half of the decade.
Predictions among analysts and experts vary, but typically we see suggestions of low single?digit national growth next year, building to a total uplift of around 20% by the end of the four-year window from 2026 to 2030, assuming inflation, wages and interest rates evolve broadly as expected.
The outlook is far from uniform across the UK, however.
Prime London and other high-value areas may lag in the near term as they digest tax changes and affordability constraints; the so-called Mansion Tax on properties valued above £2 million is set to kick in, in 2028, and that may dampen the market for that sector of homes – not an insignificant number around Herne Hill and Dulwich. London, in general, is expected to remain relatively flat over the next 2 years, according to both Savills and Hamptons, with growth picking up in 2028. Nevertheless, this is still more positive than has been the case in 2025, during which time 14% of London properties are said to have been sold at a loss. Not ‘negative equity’ – but negative growth.
Transaction volumes are likely to trend upwards from the subdued levels of 2024–2025 as confidence and affordability improve, but the market is expected to feel busy and normal rather than frothy.
When it comes to rentals, despite the threats of a landlord exodus prompted by the Renters’ Rights Act, the structural shortage of rental properties will keep values high, especially as new?build delivery is falling far short of stated government ambitions.
For home movers, there may be a pending window of opportunity. Those looking to buy in 2026 may find they are no longer competing in the ‘buyers market’ that 2025 presented – certainly towards the end of the year. Nevertheless, those who are looking to make a purchase in the early part of the year will still at least participate in a balanced market – with stock levels supporting the number of buyers searching for a new home. At the same time, mortgage products are expected to become more competitive as rates fall – in fact, lenders are already pricing in an expected cut. Buyers who prepare early, by getting advice, securing agreements in principle and setting clear budgets, will be well placed to move quickly when the right property appears.
Landlords face a more complex mix of headwinds and opportunities. On one hand, higher taxation with a 2% tax brought in on taxable profits in the Budget, tighter regulation by way of the Renters Rights Act implemented in phases from May 1, and the practical implications of rising costs, all makes for more careful financial planning.
On the other hand, strong local demand for rented homes, constrained supply and the prospect of gradually improving capital values – certainly from 2028 onwards – mean that well?run portfolios in the right locations (and in the hands of the right agent) should continue to deliver attractive long?term returns.
In this new phase, the focus for all participants is likely to be less about chasing rapid gains and more about navigating a steadier, more rules?based market with clear eyes and realistic expectations.
The local market is in reasonable shape and – to repeat a line that I feel I often use – the fundamentals here remain strong. What do I mean by that? I mean that we have a vibrant community that continues to offer people many good reasons to wish to live here.
As I reflect on 2025, yes, the property market that I work in has been tough – as have economic conditions in general.
And yet, just look at what has been going on in our local neighbourhood during the very same year. Restaurants opening, high streets thriving, traditional, old-fashioned community-focussed businesses moving back in, and community events and spectacles bringing people together.
I recognise that property prices are high, here. Even if they remain where they are for a year or two, they will still feel high – but they will remain high because there is a market for properties in this area, and that demand bolsters prices. It’s hard for young buyers, and they need more help – and frankly, it is part of our drive through our sister enterprise, Petermans Housing Initiatives. But for homeowners who worry about the inherent value of their bricks and mortar, the truth is that round here, that is as safe as houses.
If you would like to get an idea of your home’s value, you can always feel free to ask us to have a look. You do not have to have any thoughts of selling – we are happy to offer advice. We are your neighbours, and it is our field of expertise – so take advantage of us!
2025 has been a challenge. 2026? We can’t wait to find out.
Most forecasters expect modest but positive price growth in 2026 nationally, with a stronger uplift anticipated between 2028 and 2030. However, London may remain relatively flat in the short term, including areas like Herne Hill. Demand is high and properties should hold value and recover once London prices move as a whole.
Potentially, yes. Borrowing costs are forecast to ease as interest rates fall, and while competition is expected to pick up, early 2026 may still offer a relatively balanced market. Buyers who prepare early with agreements in principle and clear budgets will be in the best position when properties come up for sale.
The Act removes Section 21, ends fixed tenancies with all tenancies to become periodic, tightens rent increase rules, and more. While it has caused anxiety, good landlords who already run high-standard portfolios should fare well, especially as demand for rentals in SE24 continues to exceed supply.
Yes, though perhaps at a more moderate pace. Lambeth as a borough saw rental values rise 10.3% in the past year, far above the London average. With limited stock and new-build delivery falling short of local need, rental growth and low void periods are likely to continue into 2026.
Lower interest rates should gradually improve affordability, boost buyer confidence, and encourage previously hesitant movers back into the market. Even without a return to “cheap money”, the psychological difference between rates rising and rates easing is expected to spur renewed activity.
Yes but it depends on your objectives. Despite a tough 2025, Herne Hill’s fundamentals remain very strong: a vibrant community, thriving high streets, excellent local amenities, and sustained demand for homes. These are exactly the conditions that support long-term stability in both sales and rentals, but capital growth could be subdued until 2028.
Absolutely. Understanding your home’s value is useful for financial planning and gives you a clearer picture of your position in the market. You’re under no obligation to sell. As local agents and neighbours, we’re always happy to advise.
We are required by law to conduct anti-money laundering checks on all those selling or buying a property. Whilst we retain responsibility for ensuring checks and any ongoing monitoring are carried out correctly, the initial checks are carried out on our behalf by Lifetime Legal who will contact you once you have agreed to instruct us in your sale or had an offer accepted on a property you wish to buy. The cost of these checks is £60 (incl. VAT), which covers the cost of obtaining relevant data and any manual checks and monitoring which might be required. This fee will need to be paid by you in advance of us publishing your property (in the case of a vendor) or issuing a memorandum of sale (in the case of a buyer), directly to Lifetime Legal, and is non-refundable. We will receive some of the fee taken by Lifetime Legal to compensate for its role in the provision of these checks.