With the number of homes for sale at a 10-year high, today’s property market leans heavily in favour of buyers. But where are house prices heading next?
Following a surge in buyer activity to beat the April stamp duty hike, the housing market is entering a phase of adjustment, sparking concerns about a slowdown. Yet, lower mortgage rates and more flexible lending criteria are softening the blow of increased tax burdens, offering an affordability boost to prospective buyers.
A Mixed Landscape
Price trends remain uneven following the deadline-driven spike in Q1 activity. Rightmove’s latest data shows the average asking price hit a record £379,517 in May, up 1.2% year-on-year. However, this was the smallest seasonal increase since 2016, largely due to the influx of listings.
“The 10-year high means that sellers need to be aware of the level of competition they’re facing for the attention of buyers, and of the prices that are being advertised in their location,” says Rightmove property expert Colleen Babcock. “Buyers may have several similar homes to choose from in their area and a home that appears over-priced compared to the competition may not get a second look.” She adds that the current conditions are “more subdued than usual” and clearly favour buyers.
Signs of a Bounceback
After the stamp duty deadline, buyer demand in April dropped 4% year-on-year. However, cumulative demand in 2025 remains 3% ahead of 2024, with early signs of a rebound in May. Rightmove reports that agreed sales are now 5% higher than at the same time last year. Zoopla’s data, based on agreed sales rather than asking prices, supports this recovery narrative. Average sold prices are up 1.6% year-on-year, now reaching £268,250, an annual increase of £4,330. May also marked the highest level of agreed sales since the pandemic peak in 2021. The uplift is being driven by a 13% rise in listings compared to last year, along with easing mortgage rates and broader choice for buyers.
Boosted Affordability
Zoopla notes that more lenient lending assessments now allow buyers to borrow around 20% more than earlier this year. Despite homes selling for an average of £16,000 below asking price, this stability has aided market traction. Regionally, the Northwest and Scotland lead growth with annual price rises of 3% and 2.9%, respectively. Cities like Blackburn saw a notable 5% increase. In contrast, Southern England saw sub-1% growth, constrained by higher inventory.
“The housing market has adjusted to higher mortgage rates over the past three years, with modest price falls over 2023 and a large, initial drop in housing sales, which have largely recovered to their long-run average,” says Zoopla executive director Richard Donnell. He projects that “the market is on track for 5% more sales this year, compared to 2024, with 1.15 million predicted transactions.”
Future Trends and Policy Impacts
Donnell believes that easing affordability rules will further fuel the market. “One big factor limiting house-price inflation is the impact of mortgage regulations introduced in 2015,” he explains. “Lenders have been easing mortgage stress tests in recent weeks, delivering homebuyers a 15%–20% boost to borrowing capacity for the same mortgage rate.” He anticipates a 2% increase in house prices by year-end, with stronger growth in the North and weaker in the South.
Knight Frank has also raised its 2025 forecast from 2.5% to 3.5%, and now expects total five-year growth to hit 22.8% between 2025 and 2029. Meanwhile, Curetons property-buying agent Robin Edwards expects modest national growth of 0%–2% over the next year, with annual increases of 2%–4% in the years ahead. “The recent stamp duty changes created a temporary flurry of activity in some areas,” says Edwards. “However, the long-term effect will likely be a cooling in demand from landlords and second-home buyers.” He adds: “Much will depend on inflation stabilising, interest rates falling and the continued undersupply of housing.”
Landlords Under Pressure
According to Lloyd Edwards, senior adviser at Bentley Holmes, lower interest rates over time could renew buyer confidence and increase property prices, especially for first-time buyers and movers. However, London landlords are increasingly exiting the market. “I am seeing landlords selling up in London and the Southeast. It is simply not profitable with interest rates at their current levels unless they have a low loan-to-value ratio,” says Lloyd Edwards. “Additionally, the tax burden on them is punitive.”
Robin Edwards concurs, noting that many are shifting to limited company models or leaving the market entirely. Some second-home owners are also selling due to rising council tax rates and local opposition to holiday lets. Zoopla’s figures show a shift toward professionalisation in the rental sector. “While rental supply has been static, the sector has been professionalising with 50% of homes owned by landlords with the largest portfolios of five-plus homes,” says Donnell. “Smaller landlords with one or two homes, who didn’t see being a landlord as a business, are selling up, one in 12 homes for sale on Zoopla is formerly rented.” He concludes that while smaller landlords exit, larger investors may step in, particularly in higher-yield markets outside Southern England.
With interest rates falling and affordability improving, the housing market appears more resilient than some feared. But the next set of price indices will be a critical measure of whether this momentum continues.
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Source: Leah Milner, Mortgage Strategy
