Real estate market sees rapid increase in property values, surpassing two-year growth record
UK Housing Market Surges Amidst Economic Challenges
The UK housing market is defying economic headwinds, with house prices continuing to rise at a steady pace. According to recent reports, house prices have increased by around 3.9% in the year to May 2025, reaching an average of £269,000 across the UK [2][3][4].
This surge in house prices coincides with a decline in transaction volumes, which were 11.8% lower compared to a year earlier and fell 25.1% between April and May 2025 on a seasonally adjusted basis [3]. The lower supply of properties available for sale likely supports higher prices despite the challenging economic conditions.
Some analysts note that certain banks have started cutting mortgage rates recently, helping to stimulate demand [2]. This eases affordability pressures for some buyers and can help sustain price increases. The regional diversity of price growth, with areas like Yorkshire and the Humber and the North East showing especially strong increases, suggests localised demand and economic resilience in parts of the country [3].
The housing market often experiences a lag, with completed sales data reflecting transactions agreed weeks or months prior. Therefore, rapid changes in economic conditions or interest rates may take time to fully impact prices [3].
Guy Gittins, CEO of Foxtons, stated that the market is once again starting to accelerate after the rate of house price growth slowed in the lead up to the Autumn Budget [5]. Marc von Grundherr, of Benham and Reeves, added that nothing supercharges the property market quite like a stamp duty deadline [6]. The news of stamp duty changes has caused an uplift in buyer demand, with buyers looking to secure stamp duty relief before the deadline in April 2023 [7].
The Autumn Budget announced changes to stamp duty that may provide a short-term boost to the market [8]. As a result, house prices rose year-on-year by 3.7% last month, according to Nationwide's Housing Index [9]. However, despite the positive news, various industry experts have warned that the market could slow again as a result of interest rates still being high and the added fiscal stimulus from the Autumn Budget [10].
In light of these developments, if you are contemplating selling, now may be a good time to do so, according to Marc von Grundherr [6]. Buyers who want to take advantage of current stamp duty relief thresholds need to act now to complete in time. The market is expected to remain active at the start of next year due to the stamp duty relief [4].
Looking to the future, advancements in AI might potentially help the government reach housing targets in the future [11]. However, the full impact of these advancements remains to be seen.
In conclusion, the combination of reduced supply, pockets of sustained demand supported by selective mortgage rate cuts, and regional economic variations is driving the continued rise in UK house prices despite high interest rates and broader economic headwinds [2][3]. Buyers and sellers should stay informed about market developments to make the most of current opportunities.
References: [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] - Sources omitted for brevity.
- The surge in house prices in the UK housing market, despite economic challenges, can be attributed to the decline in property supply and selective mortgage rate cuts by certain banks.
- Yields from investing in real estate could be influenced by The Autumn Budget's changes to stamp duty, which may offer a temporary boost to the market but could also lead to a potential slowdown due to high interest rates.
- AI advancements in the housing industry might hold potential for the government to meet future housing targets, although the full impact of these advancements remains uncertain.
