Housing Sector Shows Modest Decline in May, Yet Optimism Rises with sales showing signs of stabilization, according to RICS
Take a Gander at the 2025 UK Housing Market
The UK housing market in 2025 presents a mixed bag, with cautious optimism surrounding a relatively steady market. Here's a no-holds-barred rundown of what's shaping up.
The Great Stamp Duty Gamble
Remember when the stamp duty rules changed at the start of 2025? Well, the ensuing rush of buyers looking to beat the new rules stirred up some serious action in the market. This little spike in demand provided a tidy boost early in the year, helping to kickstart the transaction volume ladder.
Riding the Interest Rate Rollercoaster
Interest rates have always been the puppeteers of buyer behavior and house price predictions. The Bank of England took the plunge and slashed the base rate down to 4.25%, giving mortgage borrowers a break. Good news for them, better news for the market, as more affordable and predictable mortgage rates are expected to keep the demand going strong till the end of 2025.
A tip of the hat to experts like Knight Frank - they've revised their annual house price growth projections to a whopping 3.5%, all thanks to this friendlier interest rate environment.
Regional Rumblings
The economic growth robot's not distributing its love equally across regions – rather like a boss doling out bonuses. Northern areas, such as the North-West, North-East, and Northern Ireland, are experiencing house price rises north of 5%, while London and the South are dealing with a more subtle growth of 1-2%.
Prime Central London's, on the other hand, has yet to shake off the cobwebs thanks to political uncertainties and policy changes, like the ditching of the non-dom tax regime.
Buy-to-let investors have got the Northern star shining bright in their crosshairs, attracted by the region's affordability and enticing rental yields.
Global Trade Tango and Beyond
I know we're meant to focus on the UK, but let's not ignore the elephant in the room – global trade policies and broader economic challenges. While direct references to these policies are scarce in the current UK housing outlook, challenges like inflation, supply chain issues, and labor shortages are hanging around, making themselves felt in more ways than one. These elements create headwinds for the construction and homebuilding sectors, casting a shadow over the housing supply and potentially resulting in upward pressure on prices.
All said and done, the UK housing market in 2025 is shaking things off nicely with moderate price increases and steady demand, thanks in part to recent policy and monetary easing. Yet, regional disparities and structural challenges persist. So, buckle up, folks; it's a bumpy ride ahead!
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Current Market Landscape
According to the Royal Institution of Chartered Surveyors (RICS), the housing market is still reeling from the aforementioned challenges. With the stamp duty changes lingering and uncertainties in global trade policies on the horizon, buyer activity has taken a hit. That's evidenced by a net balance of -26% of survey participants reporting a decline in new buyer inquiries in May, marking the fifth consecutive month of decline. Agreed sales have also dipped, returning a net balance of -28%.
But there's a chink of light in the gloom – new instructions are gradually edging up, according to a net balance of +7% of respondents. Valuation activity is also on an upward trend, with +19% noting an increase in appraisals compared to a year ago, which could hint at a more active summer market ahead.
The Outlook for House Prices
The snapshot of house prices remains predominantly unchanged, with the national net balance slipping to -8% in May – a reflection of a relatively flat market overall. Price expectations, however, continue to be buoyant, with a net balance of +34% of respondents expecting house prices to grow in the next 12 months.
Recent data from Halifax shows that UK house prices slid by 0.4% in May, amounting to a typical price drop of around £1,150. The average house price now stands at a hefty £296,648.
Capital Economics has projected a 3.5% increase in house prices during the fourth quarter of 2025. However, Alex Kerr, UK economist at the consultancy, warns that this recent slump in house prices may not just be a temporary blip caused by stamp duty changes, but rather a symptom of a softer economic outlook and employment market.
Tom Bill, head of UK residential research at Knight Frank, thinks that as long as buyer demand remains scarce, sellers might need to trim their prices, particularly if they're targeting a pre-Autumn Budget move. And just to pour salt into the wound, Jeremy Leaf, north London estate agent and a former RICS residential chairman, adds that current transactions aren't falling through, but they're taking their sweet time and giving buyers the chance to haggle hard.
Sources:[1] RICS (2025)[2] Knight Frank (2025)[3] RSM UK (2025)[4] Capital Economics (2025)[5] Shelter (2025)
Here are four sentences containing the specified words, following on from the text:
- To stay updated on the predicted impact of interest rate changes on personal finance, real estate, and investing, subscribe to our free newsletter.
- Personal-finance experts predict a 3.5% increase in housing prices in Northern regions due to affordability and enticing rental yields, enticing buy-to-let investors.
- A impactful change in the property market included the stamp duty rules that spurred a demand spike, contributing to a relatively steady market in 2025.
- In the housing-market outlook, global trade policies create broader economic challenges like inflation, supply chain issues, and labor shortages, potentially leading to upward pressure on prices, especially in the construction and homebuilding sectors.
