While buyer confidence is still tentative, signs of improvement are emerging — driven in part by a return of planning momentum and a renewed Government push to unlock housing supply across the country.
Head of Residential Property, Gary Jeffries, explores the latest residential property market trends.
increase in annual house prices (July) Nationwide House Price Index
Average House Price (June 2025) – Halifax
increase in buyer demand (July - Zoopla)
After a flurry of activity in April triggered by the Government’s reversal of stamp duty thresholds, Q2 has seen the market settle into a more measured pace, underpinned by an unseasonable summer boost.
Although this short-term stimulus provided a welcome boost to transaction volumes, much of that demand appears to have been pulled forward, and we are now in a period of consolidation.
RICS’ June market survey shows new buyer enquiries just tipping into positive territory for the first time since the end of last year.
Agreed sales also continue to recover, albeit at a more subdued rate. Importantly, forward-looking indicators suggest a cautiously optimistic outlook, with sales expectations for the next three months turning modestly positive.
House price growth has mirrored this pattern. Following a dip in June, July saw a modest 0.6% uplift according to Nationwide, with annual house price growth now sitting around 2.4%.
This points to a market gradually adjusting to the new interest rate environment, rather than one in full retreat.
In the rental sector, the picture is more nuanced. After several years of sharp rent inflation, the market is finally beginning to cool, with growth slowing in many parts of the country.
That said, tenant demand remains strong, especially in key urban areas, and rental values are still rising — albeit at a slower pace.
Average monthly rents in the UK now stand at £1,365 outside London, and £2,712 within the capital. These figures reflect strong underlying demand, constrained supply, and a lettings market still catching up after years of underinvestment and regulatory uncertainty.
However, with more landlords exiting the sector — and new supply yet to materialise at scale — affordability pressures will likely continue for renters into the second half of the year.
Arguably the most significant development this summer is the growing role of planning reform in shaping the residential outlook.
In June, the Government doubled down on its ambition to deliver between 1.3 and 1.5 million homes this Parliament and, crucially, it’s now backing that ambition with legislative teeth.
A new package of planning measures, announced as part of the Planning & Infrastructure Bill, promises to be the most radical overhaul of the system in over a decade.
Key elements include:
These changes are already starting to have an impact.
Planning applications for new homes rose by 33% year-on-year in Q2, with particularly strong growth in the Midlands and North West.
If this momentum continues, we could see a material shift in housing delivery from late 2025 onwards — though much depends on how quickly local authorities can respond.
Looking ahead, the residential market is entering a more balanced phase.
With interest rates expected to edge down further in the autumn, potentially to around 3.75% by year-end, mortgage affordability should improve, albeit gradually.
This will support buyer sentiment and help sustain modest house price growth through the remainder of the year.
However, risks remain. Inflationary pressures have not fully abated, and a further spike in energy or food prices could delay the Bank of England’s rate-cutting cycle.
Meanwhile, the rollout of leasehold and rental reforms will continue to reshape the landlord landscape, with implications for the private rented sector (PRS) in particular.
The shift in tone around planning is notable. For the first time in several years, supply-side optimism is back on the agenda, with policymakers, developers and local authorities starting to pull in the same direction.”
Gary Jeffries, Partner and Head of Residential Property expert at Vail Williams LLP.
If that continues, it could mark a turning point in tackling the UK’s long-standing housing shortage.
Summer 205 finds the UK residential market on firmer ground than it was six months ago. While we are not yet in a phase of strong growth, the signs of recovery are becoming more consistent.
With planning reform now taking root and monetary policy gradually easing, there is cause for cautious optimism as we move towards the end of the year.
