The UK property market continues its steady recovery, with modest house price growth and improving mortgage affordability signalling cautious optimism for buyers, sellers, and investors alike.
According to Nationwide, UK house prices rose by 0.5% in May, bringing annual growth to 3.5%, with the average home now priced at £273,427. Zoopla’s figures show a more moderate annual rise of 1.6%, but both point to a market stabilising after a volatile start to 2025. Sales activity has improved, with May recording the highest number of agreed sales in four years, helped by a rise in new listings (+13% year-on-year), giving buyers more choice.
Regional variations remain stark. The North and Midlands are seeing stronger price growth (around 3%), while Londoncontinues to struggle with affordability. Some boroughs have even seen prices fall – notably –8% in Islington and –15% in Kensington & Chelsea – as buyers look beyond the capital for better value.
Crucially, mortgage costs are coming down. Following a recent Bank of England rate cut to 4.25%, many lenders are now offering fixed-rate deals under 4%. With further rate cuts anticipated, mortgage affordability is set to improve, particularly for first-time buyers. Most analysts expect borrowing to become easier throughout 2025, as wage growth outpaces inflation and banks loosen affordability criteria slightly.
However, recent stamp duty changes have impacted affordability. The nil-rate threshold for first-time buyers has fallen from £425,000 to £300,000, increasing upfront costs for many. Buyers must now budget more carefully, even as lower mortgage rates offer some relief.
Sellers are advised to price realistically. With more stock on the market and a slower pace than during the post-pandemic boom, overpriced properties risk stagnation. Well-presented homes priced in line with local competition are still selling quickly.
Buy-to-let investors continue to benefit from high rental demand. UK rents are rising at over 7% annually, and this growth is expected to continue due to limited rental supply and sustained tenant demand. While some landlords remain cautious due to proposed legislative changes – including the Renters’ Reform Bill – current rental yields remain attractive in many regions, especially outside London.
Key takeaways:
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House prices are rising modestly, supported by strong employment and improving confidence.
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Falling mortgage rates are helping to improve affordability, with more competitive deals expected in coming months.
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Stamp duty changes may increase costs for some buyers, particularly those purchasing above £300,000.
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Sellers should remain price-sensitive due to increased competition and longer selling times.
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Rental demand and yields remain strong, offering opportunities for well-informed investors.
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