UK Housing Market Shows Signs of Recovery Amid Slower Rental Growth

The UK residential property market is showing signs of renewed momentum as house prices continue to rise and buyer activity picks up, despite a notable slowdown in rental growth.
According to Nationwide, UK house prices rose by 0.5% in May, pushing annual growth to 3.5% and bringing the average home price to £273,000.

This uptick is attributed to a combination of higher wages, low unemployment, and improved mortgage affordability. The average monthly payment for a two-year fixed mortgage has dropped by £95 since December, easing pressure on buyers.

Meanwhile, the rental market is cooling. Zoopla reports that average rents for new lets increased by just 2.8% in the year to April 2025—the slowest pace since July 2021.
The average rent now stands at £1,287 per month.

Despite a sharp drop in completed sales in April—down 66% following changes to Stamp Duty thresholds—early indicators for May suggest a rebound. Both Zoopla and Rightmove recorded the busiest May for agreed sales in four years, with activity 13% above pre-pandemic averages.

Regional disparities persist. Scotland and the North-West of England are leading in price growth, while coastal areas like Torridge and Anglesey are seeing declines. The Labour government’s recent pledge to invest £5 billion in housing and build 1.5 million homes over five years could reshape the market, though experts remain sceptical about the feasibility of this target.

With inflation rising to 3.4% in April and ongoing uncertainty around interest rates, the market remains cautiously optimistic. Analysts suggest that if affordability continues to improve, house prices could grow by 5% to 7.5% over the next five years.