UK Property Prices Surge in May - Will Wage Growth Catch Up with Soaring House Prices?
- TBA
- Jun 25
- 5 min read
Think people stop buying homes just because the economy’s tough?
Absolutely not!
Despite significant volatility in global financial markets during the first half of 2025—due to factors such as US tariff policies, geopolitical tensions, and inflationary pressure—UK property prices have continued to rise against the trend.
According to recent data, the average asking price of homes listed in May climbed to £379,517, while average rent in London surged to around £2,300 per month. Meanwhile, as of now in 2025, the average monthly salary for full-time employees (including bonuses) is approximately £2,846. After rent, that leaves just over £500, which explains why it’s often said that the cost of living in London is especially high for single individuals.
According to Rightmove, the average price of properties for sale rose by 0.6% (approximately £2,335) this month. Although this marks a new record high, it is the lowest May increase since 2016.
Rightmove’s data shows that there was a spike in demand in March, as buyers rushed to complete transactions before stamp duty changes came into effect in England in April, but activity slowed the following month. Compared to April 2024, buyer interest in April 2025 dropped by 4%, the first year-on-year decline in 2025.
Nevertheless, demand for the year to date is still 3% higher than in 2024, and early signs in May suggest a rebound. Sales agreed in April were up 5% year-on-year, indicating that committed buyers are still moving decisively.
Some people are buying to live in their homes, others for investment. Overall, while there’s been short-term fluctuation, the UK property market remains on an upward trajectory.

Why is the UK property market still booming?
1. Domestic policy stimulus & favourable interest rates
Stamp duty changes
From 1 April 2025, the UK introduced revised stamp duty thresholds, reducing the nil-rate threshold for first-time buyers from £250,000 to £125,000, while also increasing additional levies for second homes and overseas buyers. This led to a rush of transactions ahead of the change, with Q1 2025 transaction volumes up 5% year-on-year, and property enquiries in some areas like London up 13%. The so-called “rush-to-complete” effect temporarily pushed up prices, with average UK house prices reaching a record high of £377,000 in April.
Low interest rates and expectations of further cuts
Since 2024, the Bank of England has gradually lowered interest rates, and in May 2025 cut rates by another 25 basis points to 4.25%, with two more potential cuts forecast within the year. Mortgage rates fell accordingly, with five-year fixed rates down to about 4%, significantly reducing the cost of buying a home. This lower borrowing cost encouraged both first-time buyers and movers, particularly during policy windows like the stamp duty changes.
2. International investment & safe-haven appeal
Prime locations as safe-haven assets
Amid global market turbulence, UK properties—particularly in prime London areas—are viewed as secure investments. International buyers (e.g. from North America and the Middle East) are drawn to the UK for its political and economic stability and world-class education, which drives up prices in the luxury market.
Capital appreciation and rental income make dual gains
In central London, annual capital appreciation rates of 4–5% and stable rental yields are attracting long-term investors.
3. Economic resilience & market confidence
Stronger-than-expected economic performance
In Q1 2025, UK GDP grew by 0.6%, and leading indicators show signs of economic recovery.
Unemployment remains low, and real wages have increased, supporting home buying power. Despite rising global trade uncertainties, UK interest rate cuts and fiscal policy have cushioned the blow, improving resilience.
Post-Brexit adjustment stabilising the market
The long-term impacts of Brexit are easing, with new UK–EU agreements (e.g. on trade and security) reducing friction and boosting business confidence.
As the market adapts to post-Brexit rules, investor confidence is returning—especially in international cities like London where property remains a favoured asset class.

4. Long-term structural demand
Population growth & housing shortage
The UK population continues to grow, but housing supply remains insufficient. Although property listings in 2025 reached their highest level in 10 years, demand still outstrips supply—particularly for first-time buyers and growing families. Government plans to ease planning rules and build more social housing may help, but short-term impact will be limited.
Wealth transfer & changing investment preferences
After the pandemic, some households accumulated savings to fund home purchases. Younger generations are increasingly buying homes to preserve asset value, while pensions and institutional investors are increasing real estate allocations, further fuelling demand.
What are the tax changes in 2025?
Stamp Duty Land Tax (SDLT) Revision
From 1 April 2025, the nil-rate threshold for standard buyers fell from £250,000 to £125,000—meaning that transactions above £125,000 are now taxed starting at 2%.For first-time buyers, the tax-free threshold dropped from £425,000 to £300,000, with the portion above that taxed at 5%.
For second properties, the additional SDLT surcharge rose from 3% to 5%, with overseas buyers paying an additional 2%, bringing the total SDLT to 7%.For example, a £250,000 second home now attracts £17,500 in stamp duty, up £5,000 from before.
Council Tax Surcharge for Second Homes
From 1 April 2025, England and Wales began levying a council tax surcharge of up to 200% on second homes, affecting around 500,000 properties across 200 districts.
Capital Gains Tax (CGT) Increase
As of April 2025, CGT rates increased significantly:
Basic rate rose from 10% to 18%
Higher rate rose from 20% to 24%
This applies to all asset sales, including buy-to-let and second homes, with a substantial impact on landlords and investors.
Inheritance Tax Tightening
Threshold frozen: The inheritance tax threshold (£325,000) is now frozen until 2030, projected to generate over £2 billion in additional tax revenue.
Non-UK residents: From April 2025, overseas assets owned by non-UK domiciled individuals will be subject to 40% inheritance tax, without the standard exemptions available to UK residents.
The increase in SDLT and CGT is likely to raise purchase costs—especially in high-priced areas like London.
The higher tax burden on second homes may also cool investment demand.
However, the extra revenue from council and inheritance tax—over £1 billion annually—is promised to go toward new housing and public services, potentially improving quality of life. A silver lining?

Some advice from TB Accountants
There have been significant UK property tax changes in 2025.
If you’re planning to buy a property but missed the April tax deadline—or are a non-UK resident—it’s strongly advised to consult a professional tax adviser to avoid unnecessary tax risks.
For individuals and businesses looking for UK taxation services, use our contact form to get in touch for more information.
Get in touch with us at info@tbgroupuk.com or for a free one-to-one consultation.