Property Sector Responds to Recent UK Housing Price Trends

Annual rate of house price growth increased marginally in May to 3.5%, compared to 3.4% in April, according to Nationwide’s May House Price Index which has just been published.

House prices were up 0.5% month-on-month, led by growth in in predominantly rural areas.

* Seasonally adjusted figure (note that monthly % changes are revised when seasonal adjustment factors are re-estimated)

Annual UK house price growth was marginally stronger in May at 3.5%, compared with 3.4% in April. House prices rose by 0.5% month on month, after taking account of seasonal effects.

Official data confirmed that there was a significant jump in residential property transactions in March, with buyers bringing forward their purchases to avoid additional stamp duty costs. Owner occupier house purchase completions were around twice as high as usual and the highest since June 2021 (which was also impacted by stamp duty changes).

“Nevertheless, mortgage approvals data suggests that market activity appears to be holding up well following the end of the stamp duty holiday. Despite wider economic uncertainties in the global economy, underlying conditions for potential home buyers in the UK remain supportive.

Robert Gardner, Nationwide’s Chief Economist, said: “Unemployment remains low, earnings are rising at a healthy pace (even after accounting for inflation), household balance sheets are strong and borrowing costs are likely to moderate a little if Bank Rate is lowered further in the coming quarters as we, and most other analysts, expect.

Nationwide’s recent special report identified that average house price growth in predominantly rural locations has continued to outpace more urban areas.  Between December 2019 and December 2024, house prices in predominantly rural areas increased by 23%, compared with 18% in areas that are largely urban.

The pandemic had a significant impact on housing demand during 2021 and 2022, with a shift in preferences towards more rural areas, particularly amongst older age groups. Whilst these effects have now faded, less urban areas have continued to hold the edge in terms of house price growth.

Gardener added: “In our latest housing market survey, we focused on homeowners who have moved in the last five years. Our findings indicate that the majority (63%) of house moves were within the same type of area, with the biggest flow being within large towns or cities (as shown in the diagram above). Around 9% of moves were from towns/cities to rural areas (villages or hamlets)², although this was partially offset by 7% who moved from rural to more urban areas.”

“However, amongst those who moved to a different type of area, there was a significant difference by age group, with younger people (those aged 25-34) tending to move to more urban areas, and older age groups, particularly 55+, favouring more rural areas (see chart at the bottom of the previous page).”

Industry reactions:

Nathan Emerson, CEO at Propertymark, commented: “It is reassuring to witness consistent house price growth and a strong appetite as people continue to approach the homebuying and selling process, especially when the UK economy continues to adapt to both domestic and international events.

“With the rate of inflation still very much in sharp focus, it will be interesting to see what direction of travel the Bank of England may take regarding base rates when they meet again next week. Ultimately it would be welcome news for consumers should there be any further base rates cuts, however the Monetary Policy Committee will likely be approaching any decision with extreme caution, especially considering many economists are predicting inflation to further rise.”

David Johnson, managing director of property consultancy INHOUS, commented: “Buyer demand picked up immediately after the bank holidays and has remained strong throughout May. This level of buyer motivation has resulted in the majority of sellers receiving multiple offers and achieving their asking price. One and two bedroom apartments remain particularly sought-after as well as larger family homes in and around commuter hotspots.”

Jean Jameson, chief sales office for Foxtons, commented: “The market continues to make positive strides forward, with the rate of house price growth accelerating on both a monthly and annual basis.

“This momentum has only intensified following a renewed wave of buyer and seller activity as the stamp duty dust has settled, strengthening what has so far been a very busy first half of the year for the UK property market.

“Whilst the expectation is that the Bank of England will hold the base rate at 4.25% this month, a heightened degree of mortgage provider competition has driven down rates in recent months and so we can expect buyer appetites to remain strong.”

Jason Tebb, president of OnTheMarket, said: “Even though a considerable number of buyers brought forward transactions to take advantage of the stamp duty concession before it ended in March, there is still plenty of activity in the market now the incentive is no longer available. Average house prices remain relatively steady although there are regional differences and an urban/rural divide exacerbated by the pandemic.

With the stamp duty holiday no longer available, other inducements, such as interest rate reductions, are even more essential. Four quarter-point base-rate cuts since last August have noticeably boosted buyer and seller confidence. Further reductions will give added impetus to the market as we move into summer and the rest of the year.

Affordability pressures remain, despite rate reductions, with inflation proving stubborn and the high cost of living. Lenders have been trimming mortgage rates and easing criteria in recent weeks which should help a little, giving buyers who rely on mortgages more wiggle room.”

Marc von Grundherr, director of Benham and Reeves, noted: “Whilst we saw the market take a momentary pause for breath following the stamp duty deadline, it’s clear that it’s back to business as usual, with the monthly rate of decline seen last month reversing and the annual rate of growth also accelerating in May.

“This was always to be expected and, so far, predictions of a positive year for the property market are ringing true, as we’re seeing consistently strong growth in mortgage approval volumes, more deals done and a strengthening in property values.”

Verona Frankish, CEO of Yopa, commented: “Not only has the market benefited from a degree of post-stamp duty deadline stability, but the reduction in the base rate seen at the start of May has also helped to drive buyer activity, as those looking to make their move continue to benefit from improving affordability where mortgage rates are concerned.

“Whilst the general expectation is that the base rate will be held this month, this is unlikely to deter the nation’s homebuyers, who remain keen to transact despite interest rates sitting higher than they may have become accustomed to in recent years.”

Alice Haine, at Bestinvest by Evelyn Partners, remarked: “While some buyers are clearly pushing ahead with their purchase journey, others may now be mulling their options more carefully as higher costs pose a fresh challenge. Lower stamp duty thresholds have the biggest impact on first-time buyers as they must now save enough to cover a potentially sizeable tax bill in addition to their deposit. This may prompt more lenders to offer 100% mortgages to help first-timers get a foot on the ladder, particularly as a number of providers have already relaxed their affordability rules in a bid to attract more clients.

“Borrowing conditions have improved in recent months, something that may be helping to prop up the market. Mortgage rates have eased on the back of four interest rate cuts from the Bank of England since last August though there has been some volatility in the recent weeks amid shifting interest rate expectations. Sticky inflation may also slow the pace of rate cuts from here. This has been driven by a sharp rise in most household bills in ‘Awful April’ along with businesses passing the burden of higher employment costs onto consumers and global uncertainty prompted by US President Donald Trump’s unpredictable tariff policies impacts.

“For many borrowers, home loan rates will be in a far better place than they were at the height of the mortgage crisis but not everyone can expect a better deal when they eventually refinance. For almost half a million homeowners* set to remortgage this year when they roll off their cheap, five-year, fixed-rate deals secured when interest rates were at rock bottom, it will be time to adjust their household budget to make space for an almost inevitable jump in repayment costs.

“While the Bank of England cut interest rates in May, there is less certainty they will follow up with a fifth rate cut in June. The rate-setting Monetary Policy Committee will be keen to keep inflationary pressures at bay, not only from Chancellor Rachel Reeves’ tax hikes on businesses but also any further threats from Trump’s tariff fiasco.

“Uncertainty is becoming the new normal and for many first-time buyers or home movers looking to refinance their existing mortgage soon, it may be better to push ahead with a purchase rather than wait for the ideal borrowing conditions. Plus, the traditional surge in listings at this time of year is a positive buyers can take advantage of, as a wider stock of homes to choose from raises the potential for heavier negotiation on price.”