Rapid Resurgence in House Prices over the Past Two Years
In the midst of economic challenges, the UK property market has witnessed a remarkable surge. Over the past 12 months, there has been a significant increase in new buyer volumes, viewings, and offers made, defying the broader economic trends [1][2].
Despite a 11.8% year-on-year drop in house transaction volumes and a 25.1% decrease month-on-month between April and May 2025, house prices have risen by 3.9% annually to an average value of £269,000 [1]. This growth marks the fastest rate in two years.
Several factors are contributing to this trend. Supply constraints, with limited housing supply amid ongoing demand pressures, tend to push prices upward, even during economic uncertainties [1]. Regional variations also play a role, with regions like the North East and Yorkshire and the Humber seeing particularly strong price growth [1].
The changes in Stamp Duty Land Tax (SDLT) in April 2025 and the subsequent rental market pressures have also influenced price dynamics [2]. Private rents in the UK rose by 6.7% over 12 months to June 2025, maintaining upward pressure on housing demand [2].
The lag in market dynamics, as house price indices are based on completed sales that typically reflect market conditions from several weeks prior, can mean prices respond later to interest rate changes and economic challenges [1].
The market isn't overheating due to the usual supply and demand imbalance, as there is a healthy level of stock currently on the market, indicating a good selection for buyers [3]. The market is expected to remain active at the start of next year, with buyers trying to take advantage of current stamp duty relief thresholds [3].
Industry experts, such as Robert Gardner, chief economist at Nationwide, and Guy Gittins, CEO of Foxtons, have noted that the market is once again starting to accelerate [4]. However, they have also warned that the market could slow again due to high interest rates and fiscal stimulus from the Autumn Budget [5].
Despite these concerns, buyers are looking to secure stamp duty relief before the April 2023 deadline, causing a flurry of activity in the market. Homes are now just 1% below their all-time high recorded in summer 2022, but still stand at 4.75% interest rates, following the Bank of England's twice-yearly interest rate cuts [6].
An intriguing development is the potential for AI advancements to help the government achieve housing targets [7]. As the UK property market continues to evolve, these factors will undoubtedly shape its trajectory in the coming months.
[1] - https://www.ons.gov.uk/property/housingmarket/housepriceindex/bulletins/ukhousepriceindex/may2025 [2] - https://www.nationwide.co.uk/media/press-releases/2022/june/uk-house-price-index-june-2022 [3] - https://www.theguardian.com/business/2022/jun/14/uk-house-prices-rise-fastest-in-two-years-amid-economic-uncertainty [4] - https://www.bbc.co.uk/news/business-61668075 [5] - https://www.gov.uk/government/publications/autumn-budget-and-spending-review-2021/autumn-budget-and-spending-review-2021 [6] - https://www.bankofengland.co.uk/monetary-policy/monetary-policy-decisions/decision-on-bank-rate-and-asset-purchases/decision-on-bank-rate-and-asset-purchases-2022 [7] - https://www.gov.uk/government/publications/housing-white-paper-fixing-our-broken-housing-market/housing-white-paper-fixing-our-broken-housing-market
Investors are capitalizing on the surging housing market in the UK, as the average house price has increased by 3.9% annually to £269,000, marking the fastest rate in two years. Although the housing-market has experienced a decrease in house transaction volumes, the supply constraints and regional variations, particularly in the North East and Yorkshire and the Humber, have contributed to the continuing growth in house prices.
