The UK residential property market is showing signs of cautious optimism, following a turbulent start to the year shaped by fiscal policy shifts and global economic uncertainty. After the stamp duty threshold was reduced in April—from £250,000 to £125,000 for standard buyers and from £425,000 to £300,000 for first-time buyers—transaction volumes initially dipped but have since rebounded.
According to HMRC, residential transactions rose by 25% in May compared to April, reaching 81,470 seasonally adjusted sales, although this figure remains 12% below May 2024 levels. This rebound suggests that the market is stabilising after the “cliff edge” effect caused by buyers rushing to complete before the stamp duty changes took effect.
Price Trends and Buyer Behaviour
House price growth remains modest. Zoopla reports a 1.4% annual increase, with stronger growth of 2.7% in sub-£200,000 markets. The average estate agent in the UK is currently listing 37 homes, up from 32 a year ago, indicating a 14% increase in supply. This surplus is partly due to delayed listings from 2024 and a rise in landlords exiting the market due to increased regulation.
Despite the wider choice, pricing remains sensitive. Sellers are adjusting expectations, and buyers are negotiating harder, especially in mid-to-upper price brackets. First-time buyer activity is rising, supported by family assistance and frustration with the tight rental market, where listings have dropped sharply.
Economic Conditions and Lending
The Bank of England’s recent 0.25% rate cut to 4.25% has improved mortgage affordability, with lenders easing criteria. This could boost first-time buyer activity by 14–24%, according to Savills, and potentially add 5–7.5% to house price growth over the medium term.
However, inflation remains a concern, and further rate cuts may be gradual. Five-year swap rates hover around 3.6%, keeping fixed-rate mortgage pricing relatively stable.
Lettings
The residential lettings market remains highly competitive, with demand continuing to outstrip supply. Average monthly private rents have risen by 7.0% year-on-year, reaching £1,339, according to the ONS. England saw rents climb to £1,394, while Wales and Scotland recorded increases to £799 and £999, respectively. The North East experienced the highest annual rent inflation at 9.7%, reflecting affordability-driven migration. Landlord exits, regulatory pressures, and limited new rental stock have tightened availability, particularly in urban centres. As a result, tenants face affordability challenges, while letting agents report increased competition for quality listings and longer tenancy durations.
Outlook
The second half of 2025 is expected to be smoother, with improved buyer sentiment and more predictable lending conditions. However, the market remains finely balanced.
Higher stock levels mean realistic pricing is essential to maintain momentum, and any further economic shocks—domestic or global—could quickly dampen confidence.
In summary, the summer of 2025 marks a tentative return to normality for the UK housing market: more listings, steady demand, and a cautious but active buyer pool.
The fundamentals are in place for a modest recovery—provided sellers stay grounded and lenders remain supportive.
Darren Murphy
