Dropping property values reported by realtors, yet the market landscape varies significantly throughout Britain
Falling House Prices Across the UK: A Rics Report
House prices are declining across the UK, according to the latest survey by the Royal Institution of Chartered Surveyors (Rics). The report shows a drop in buyer enquiries in several regions, with East Anglia, the South East, and the South West experiencing the sharpest falls.
The factors contributing to this trend are interconnected and complex. One significant factor is the increase in transaction costs, such as the rise in stamp duty costs. Following the Labour government's October 2024 Budget, the additional stamp duty rate for property investors was increased from 3% to 5%, effective from April 2025. This led to a surge of transactions before the deadline, followed by a sharp drop in deals afterward, discouraging many buyers, particularly first-time buyers.
Another factor is the greater housing supply and the resulting buyer’s market. There has been a noticeable increase in homes for sale, particularly in southern England, including London and nearby regions. This larger supply amid steady demand has reinforced a buyer’s market, limiting price inflation and contributing to price falls in some areas.
Higher mortgage rates and reduced affordability also play a role. Mortgage rates have been elevated since 2022, increasing borrowing costs and reducing affordability, especially in expensive areas like London and East Anglia. This has dampened market confidence and slowed price growth.
Economic uncertainty and stagnation further exacerbate these challenges. The UK economy showing signs of stagnation or potential recession, with falling GDP, higher taxes, and job cuts, reduces buyers' purchasing power, putting pressure on house prices in certain regions.
Regional variations and market corrections are also at play. While some UK regions see price increases, areas like London and East Anglia face pressure due to these combined factors. London, in particular, is impacted by higher costs of living, mortgage challenges, and changing investor behavior post-stamp duty changes, leading to relative price declines.
Despite the overall downward trend, there are some positive signs. Over a 12-month timeframe, the majority of Rics members expect prices to rise. In Northern Ireland and Scotland, for example, house prices continue to rise. However, the market remains particularly price-sensitive at the present time, as noted by Simon Rubinsohn, chief economist at Rics.
In London, the North West, Scotland, and Northern Ireland, there has been an uptick in buyer enquiries. In contrast, fewer buyer enquiries were reported in East Anglia, the South East, and the South West of England. The sales market in July has been quiet in some areas, such as Chelmsford, due to a high number of landlords exiting the sector and causing an oversupply of property, particularly flats.
In conclusion, the combination of increased transaction costs, greater supply of homes for sale, elevated mortgage rates reducing affordability, and a weakening economic backdrop are key contributors to falling house prices in East Anglia, London, and similar UK regions in 2025.
- Due to the increase in transaction costs, such as the rise in stamp duty costs, many potential property investors are being discouraged, particularly first-time buyers, causing a decline in house prices.
- The greater housing supply, especially in regions like southern England, London, and nearby areas, has contributed to the buyer's market, limiting price inflation and leading to falls in some areas.
- Higher mortgage rates and reduced affordability, especially in expensive areas like London and East Anglia, have dampened market confidence and slowed the growth of house prices, contributing to falling house prices across the UK.
