UK Housing Market Sees Peak Price Growth in 2025

In the summer of 2025, the UK property market has returned to a more typical pace after a period of cooling linked to changes in the tax system. In July, house prices recorded their highest monthly growth since the start of the year, signaling stabilization, Bloomberg reported, citing Halifax data.

In June, the average property price increased by just 0.1%, but in July it rose by 0.4%, reaching £298,237 ($398,730). On an annual basis, prices were up 2.4%. Analysts attribute this to lower borrowing costs and rising wages, partially offsetting the impact of tax changes affecting both domestic buyers and foreign investors.

Tax Reforms and Market Impact

Since April 1, the threshold for Stamp Duty Land Tax relief has been reduced:

For first-time buyers — from £425,000 (€497,250) to £300,000 (€351,000)

For all other buyers — from £250,000 (€292,500) to £125,000 (€146,250)

This has increased buyer costs, adding an estimated £34 million in extra expenses for first-time buyers alone. In London, the tax on certain transactions rose to £11,250 (€13,162).

On April 6, the preferential non-domicile tax regime, which exempted non-residents from paying tax on overseas income, was abolished. Now all residents who have lived in the UK for 10+ years must pay inheritance tax on their global assets. While experts note this improves tax fairness, it reduces the UK market’s appeal to foreign investors.

Mortgage Activity and Demand Recovery

Nationwide Building Society estimated July’s price growth at 0.6%. Bank of England data showed a recovery in demand: mortgage approvals in June hit a three-month high. Halifax’s Head of Mortgages, Amanda Bryden, highlighted that improved affordability stems from cheaper loans, rising wages, and more flexible creditworthiness assessments. “As a result, the market is showing resilience, and activity remains high,” she said.

The Bank of England is expected to further support the market, with a possible 25 basis point rate cut to 4% — the lowest in two years. This comes amid a slowing economy and rising unemployment after higher employer taxes. Inflation in June jumped to 3.6%, a 17-month high. Economists expect a split vote among the nine-member committee, with the majority backing a 0.25% cut, two members supporting a 0.5% cut, and two favoring no change.

Outlook: Growth Likely to Slow

Analysts warn that future price growth will be limited by the prospect of further tax hikes to cover the budget deficit and an oversupply of homes. Tom Bill, Head of UK Residential Research at Knight Frank, forecasts a modest annual price increase of just a few percent by the end of 2025, largely depending on the Autumn Budget. He notes that some buyers may delay transactions after summer as parts of the economy prepare for a downturn.