UK property prices climb thanks to lower interest rates and strong demand
- Tailor My Property
- Jun 3
- 3 min read
Official figures from His Majesty’s Land Registry, published in May, show that UK house prices rose by 6.4% annually in March, up from 5.4% the month before. This was the fastest rate of annual growth in over two years as buyers raced to beat the stamp duty deadline. The average house price in the UK is now £268,250 after a rise of 1.6%, or £4,330, over the past year.
Below we break down why this is the case and what it means for the UK property market going forward.
Seasonal uptick for the market
2025 marks the fifth consecutive year in which asking prices have reached a record level in May, a time of year when the British property market is traditionally at its busiest. However, May’s monthly seasonal price increase was the lowest since 2016, as price growth was limited by the number of homes for sale, which stands at its highest level in a decade according to property database Rightmove. There are currently 13% more homes for sale than a year ago, and the average estate agent office currently has 35 unsold homes.
As a result, the present property environment is more beneficial for buyers than sellers. The number of homes for sale is currently at a 10-year high, meaning buyers have plenty of choice and can shop around for their dream home or property investment.
How changes to the stamp duty tax have impacted the latest house prices
The UK property market has been more subdued than usual this spring, with lower demand from new buyers, after a busy first quarter of the year as buyers in England and Northern Ireland raced to beat the deadline for changes to stamp duty land tax.
Now that the period of temporary stamp duty relief is over, first-time buyers are paying the property tax on homes worth more than £300,000, down from £425,000 previously. Meanwhile, home movers have seen the tax-free threshold drop from £250,000 to £125,000.
That said, the number of sales is on the rise with home buyers returning to the market after the end of stamp duty relief and the Easter holidays. According to Zoopla, data shows that the number of sales agreed per estate agent at this time of year is increasing at the fastest rate for four years since the pandemic boom of 2021. This is due to a high number of homes for sale and improvements in mortgage rates and availability.
How interest rate cuts have influenced the property market
Some market analysts believe that the uptick in activity is a result of buyers waiting for the Bank of England’s most recent cut in interest rates. Policymakers at the central bank recently lowered rates by a quarter point to 4.25% and as a result there are more mortgage products with sub 4% rates, encouraging buyers to make offers. This coupled with positive earnings growth has outpaced broader inflation and has helped to steadily improve affordability for many buyers, supporting a 6% growth in sales agreed.
Price growth varied across different UK cities
Regional property price variations are likely for the rest of the year, with prices forecast to rise more rapidly in the North than the South. Savills expects growth of 5% in the North West, the North East, Scotland, Yorkshire and the Humber. Prices in the East of England and the South West are forecast to increase by 2.5%.
House price increases also vary widely at a city level, from small price falls in Aberdeen, Brighton and Bournemouth to prices increasing by over 5% in Blackburn and Belfast, while the fastest-growing markets tend to be outside Southern England.
Cities across the North West are registering the highest rates of price growth, as rising employment rates boosts demand and prices. Higher home values and rents in large cities like Manchester are pushing demand into adjacent and accessible areas, boosting house prices.
With UK property prices climbing again after a period of stagnation or decline in some areas, investing in property now before prices rise further could ensure capital appreciation over time.
Tailor my Property has an extensive network of tax, property and investment professionals who can assist you with tailoring a strategy best suited to your unique property market goals.
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