Static property prices in June witnessed a resurgence of first-time homebuyers in Halifax
The UK housing market has shown remarkable resilience in the face of challenges, including a hike in stamp duty in April 2021. Despite a temporary stagnation in house prices in June, the market is expected to strengthen further in the second half of the year, according to Guy Gittins, CEO of Foxtons.
HMRC data on property transactions reveals that the housing market has received a boost due to rising wages easing affordability pressures. This, coupled with the resilience of the market, can be attributed to several factors.
Firstly, the strong underlying demand and limited supply have supported price resilience. Areas with constrained housing supply, consistent buyer demand, and expanding infrastructure, such as Bristol, have seen steady price growth and rental income increases despite the stamp duty rise.
Secondly, investor confidence has been driven by income yields. Residential property returns in the UK remain supported by income or rental yields rather than broad capital gains, helping sustain investor interest even when upfront transaction costs like stamp duty rise.
Thirdly, a significant rush of buyers accelerated transactions ahead of the April 2021 increase in stamp duty, pushing demand and prices higher around that period. This surge also had a positive impact on retailers and related sectors.
Fourthly, the UK allows foreign ownership of residential properties without restrictions, maintaining a broader pool of buyers who contribute to market resilience in key cities.
Lastly, overall macroeconomic and market factors have played a role. While investment volumes slowed due to global uncertainty, rental demand remains strong among students, professionals, and families, supporting steady occupancies and income-focused investing.
Interest rates have also contributed to the market's resilience. More stable interest rates have given people more confidence to plan ahead in the housing market. Mortgage approvals have picked up since April, with almost 4% more mortgages being approved in May, according to data from the Bank of England. Mortgage rates are at their lowest level since 2023.
Regional differences in house prices are evident. House prices in Northern Ireland are growing at the fastest annual rate (9.6%), followed by the north west of England (up 4.4%). The average cost of a home in the UK is currently £296,665, with the average property prices in Wales reaching £241,938 and the average home in Scotland costing £214,891.
However, not everyone shares an optimistic outlook. Ashley Webb, economist at Capital Economics, suggests that the housing market remains slow to recover. He believes that the market may take longer to fully recover due to ongoing economic uncertainty.
Despite this, the Bank of England is expected to cut rates again this year, which could further stimulate the housing market. London remains the most expensive region to buy a property, with an average house cost of £540,048.
In conclusion, the UK housing market has shown remarkable resilience despite the stamp duty hike and other challenges. The market's resilience can be attributed to continued strong local and international demand, limited supply conditions, income driving returns more than capital growth, and behavioural impacts like pre-increase transaction rushes. This has sustained price appreciation and investor interest through 2025.
- The resilience of the UK housing market, even with rising interest rates, is attributed to the strong demand and limited supply, as well as the fact that residential property returns in the UK are supported by income or rental yields.
- Areas with constrained housing supply, high demand, and expanding infrastructure, such as Bristol, have seen steady price growth and rental income increases, despite the recent increase in stamp duty.
- Despite some economists' pessimistic outlook, the Bank of England is expected to cut interest rates again this year, which could further stimulate the housing market, especially in London, where the average house cost is £540,048.
- The UK's housing market benefits from a broader pool of buyers, as the country allows foreign ownership of residential properties without restrictions, contributing to market resilience in key cities.
