Property transactions increase with descending interest rates and impending stamp duty rise in the real estate sector, according to RICS.
The UK housing market is currently experiencing a phase of gentle recalibration, according to various expert sources. This phase is characterised by modest house price growth and rising rental prices.
In a recent survey by the Royal Institution of Chartered Surveyors (RICS), a net balance of +20% of respondents believe that house prices will continue to rise over the next three months. However, this growth is expected to be modest, with prices increasing by around 1.4% over 12 months, higher than a year ago but below earlier 2025 rates.
The rise in bond yields following the Budget and its impact on mortgage rates is expected to present a challenge for the market in the short term, according to RICS. This is due to the potential increase in mortgage costs, which could act as a headwind for the market.
Despite this, there has been an increase in people looking to buy a house, and Tina Paillet, RICS president, comments that the growth in residential sales could be further supported by recent interest rate announcements by the Bank of England.
However, it's not all positive news for homebuyers. There hasn't been a universal drop in mortgage rates. Some lenders have hiked rates, while others have lowered them, leading to a complex market for those seeking to purchase a property.
The picture is not as rosy for renters. Rental properties continue to disappear from the market, and demand remains resilient in most regions. According to Rightmove, the average advertised rent hit another record high last month as landlords exited the buy-to-let sector amid fears of capital gains tax hikes in the Autumn Budget.
The rental market faces a potential transformation from the Renters' Rights Bill expected in 2026, which includes banning Section 21 evictions, capping rent rises, and introducing an ombudsman. Landlords warn that this may reduce rental supply and push rents upward further. London rents have already risen about 4% year-on-year recently.
Despite the current challenges, there is hope for a stronger recovery in the housing market from 2026 onwards. Savills predicts only about +1% growth for 2025, pushing stronger recovery prospects toward 2026–2027. In contrast, Savills predicts that house prices in the UK will increase by almost a quarter by 2029.
It's important to note that these predictions are subject to change based on various economic factors and government policies. For now, the UK housing market is in a phase of gentle recalibration, with modest house price growth and rising rental prices expected in 2025, constrained by rising supply and affordability issues, while rental prices may rise further due to regulatory changes restricting landlord actions.
[1] RICS (Royal Institution of Chartered Surveyors) survey, May 2025 [2] Savills forecast, early 2023 and mid-2025 [3] Halifax data, February 2025 [4] Rightmove forecast, 2025 [5] Chancellor Rachel Reeves' Autumn Budget, 2025
- In light of the RICS survey and the predictions by Savills, it appears that there will be a continuous focus on investing in the housing market and real-estate sector, with a moderate growth in house prices expected, albeit at a lower rate than earlier estimates for 2025.
- The rental market, however, may witness a significant transformation as a result of regulatory changes, such as the Renters' Rights Bill in 2026, and potential capital gains tax hikes, which could lead to a property market rebalancing, with rising rental prices and potentially reduced supply of housing.
