BLOGS

A market that looks stronger than it feels

On paper, UK house prices are holding up. The HM Land Registry UK House Price Index has shown positive annual growth throughout 2025 and into 2026, with the average UK property price hovering in the £290,000–£300,000 range. Rightmove's asking price tracker has nudged upward too, and Nationwide and Halifax indices have broadly confirmed the direction of travel: prices are rising, if modestly.

But dig beneath the headline numbers and a more uncomfortable picture emerges. Transaction volumes — the raw count of homes actually changing hands — tell a very different story. HMRC monthly property transaction statistics show that the number of completed residential sales has stayed well below the levels recorded in the first quarter of 2025, when a surge of activity ahead of the stamp duty threshold changes drove completions to their highest point in years.

That artificial spike has now unwound, and what remains is a market where prices are supported more by constrained supply than genuine demand momentum.

The stamp duty hangover

The end of the temporary stamp duty nil-rate band extension in March 2025 had a predictable effect: buyers rushed to complete before the deadline, pulling forward demand that would otherwise have been spread across 2025 and into 2026. Estate agents reported record enquiry levels in late 2024 and early 2025. Conveyancers were overwhelmed.

The reversion to pre-relief thresholds — with the nil-rate band falling back to £125,000 for most buyers and £300,000 for first-time buyers — added meaningful cost to transactions at the precise moment affordability was already stretched. A buyer purchasing at the UK average price now faces a stamp duty bill that, for many, represents several months of additional saving.

REalyse transaction data reflects this clearly. Completed sales across a broad range of postcode districts show a marked step-down in volume from Q2 2025 onward, with the gap between active listings and actual completions widening — a signal that properties are sitting on the market longer before finding a buyer at an agreed price.

Price resilience: supply constraint or genuine demand?

The persistence of positive price growth despite weak volumes is not paradoxical — it is a function of supply. The number of homes coming to market has remained historically low, as many existing owners who locked in low fixed-rate mortgages in 2020–2022 are reluctant to sell and re-enter the market at today's rates. Zoopla has described this as a "mortgage prisoner" effect on the supply side: sellers are trapped not by negative equity, but by the prospect of significantly higher monthly repayments on a new purchase.

This tightness in available stock is keeping average prices elevated even as buyer numbers thin out. But it is a fragile equilibrium. Annual price growth, while positive, is largely concentrated in areas with structurally tight supply — outer London commuter zones, parts of the South East, and select regional cities — while other markets are seeing near-flat or softly negative movement when adjusted for time on market and final achieved-versus-asking price discounts.

REalyse comparables data illustrates the divergence: in some postcode districts, achieved sale prices are running 3–5% below initial asking prices, a discount level that suggests sellers are still anchoring to aspirational valuations from a stronger market cycle.

Mortgage rates: better, but not good enough

The Bank of England's gradual rate-cutting cycle has brought the base rate down from its 2023 peak, and lenders have responded with more competitive fixed-rate products. Two-year fixes from major high street lenders are now available in the 4.0–4.5% range for lower loan-to-value borrowers — materially lower than the post-mini-budget spike of late 2022, but still more than double the sub-2% deals that defined the market in 2020 and 2021.

For the average first-time buyer in England, this still represents a significant affordability hurdle. ONS earnings data suggests that mortgage-to-income ratios remain elevated in most English regions, with London and the South East continuing to present the most acute affordability pressures. Outside of these regions, affordability is less extreme, but stretched nonetheless relative to pre-2022 norms.

The result is a buyer pool that has not disappeared, but has narrowed. Transactions are happening — they are just happening more slowly, with more negotiation, and often with a greater gap between what sellers hope to achieve and what buyers are able or willing to pay.

What it means for investors and developers

For property investors, the volume-price gap creates both risk and opportunity. Gross yields in parts of the Midlands and North of England remain attractive relative to current purchase prices, particularly for well-located two- and three-bedroom properties where rental demand is strong. REalyse rental yield data continues to flag districts where average yields exceed 6–7%, even after accounting for transaction costs at today's stamp duty rates.

For residential developers, the picture is more nuanced. Sales rate assumptions underpinning development appraisals — the number of units expected to sell per month — need to be revisited downward in many locations. A scheme that pencilled out on a 4-unit-per-month absorption rate in 2023 may now be looking at 2–3, extending the development period and compressing returns.

Planning pipelines remain busy: REalyse planning data shows continued application activity for residential schemes across England, particularly build-to-rent and mixed-tenure developments seeking to capture renters who cannot yet afford or access ownership. But the gap between consented schemes and actual starts is widening, as developers wait for sales market conditions to improve before committing to ground.

Outlook: when does the mismatch resolve?

The volume-price divergence is unlikely to snap back quickly. For transactions to recover meaningfully, one of three things needs to happen: mortgage rates need to fall further (which requires further Bank of England cuts and competitive lender behaviour), supply needs to increase (which requires either policy intervention or a wave of reluctant sellers), or prices need to correct to a level that clears the market at current mortgage costs.

None of these is imminent. The most likely path is a slow normalisation — volumes edging upward as fixed-rate deals mature and homeowners are compelled to move, and price growth remaining positive but modest, in the low single digits annually.

For buyers, this is a market where patience and data are competitive advantages. Understanding where asking-to-achieved discounts are highest, which property types are taking longest to sell, and where future supply pipeline could weigh on values is no longer a nice-to-have — it is essential due diligence.

The headline says prices are rising. The detail says the market is working harder than ever to sustain them.