The lender has made the view in its latest sector pulse report for the UK real estate market and cites numerous factors for this optimistic outlook over the next six months.

Stable house prices, lower mortgage rates and improving economic conditions will all support this according to the lender, with more choices available meaning buyers are expected to remain price-sensitive.

In particular, OakNorth expects challenges around affordability to ease as positive real wage growth increases alongside a decline in mortgage rates.

“Following the UK’s BTR sector robust growth in 2024, we anticipate further growth throughout 2025, with a strong pipeline of projects set to meet the growing demand, driven by substantial investment, regional market expansion, and increased international interest,” added the report.

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The fourth quarter of 2024 saw significant investment volumes in the BTR sector, with £1.9bn transacted to help volumes surpass £5bn for the first time.

Despite increases in UK private rental yields and greater support from the government, OakNorth did highlight the challenge the Building Safety Regulator (BSR) had caused housing delivery in the past six months.

This led to several high-risk buildings (HRB) projects stalling, leaving completed homes empty and putting developers under greater strain.

“As a result, BTR applications fell 41% in Q4 2024.

“While action is being taken to address the delays, including a further £2m being allocated to the BSR by the government, we expect these issues to continue to put a strain on HRB development throughout the remainder of 2025,” added OakNorth.