UK House Prices Stabilise as Market Shows 'Better Than Expected' Resilience

Market Activity Stabilising Amid Economic Uncertainty

The UK housing market showed tentative signs of stabilisation in June, according to the latest Royal Institution of Chartered Surveyors (RICS) survey, with key indicators improving from recent lows despite persistent headwinds from inflation, cost-of-living pressures, and geopolitical tensions.

New buyer enquiries, whilst remaining in negative territory, improved to a net balance of -29% in June, up from -34% in both April and May. This marked the least negative reading since February, suggesting buyer sentiment may be beginning to steady. Agreed sales similarly improved to -32% from -35% in May, indicating that whilst activity remains subdued, momentum is shifting in a marginally positive direction.

Jeremy Leaf, a former RICS residential chairman and north London estate agent, captured the cautious optimism: "Prices and activity are holding up better than we dared hope, although we are not expecting a significant summer rebound bearing in mind these distractions are likely to continue for a few more months at least."

Looking ahead, respondents expressed greater confidence in the three-month outlook, with sales expectations rising to a net balance of -16% from a recent low of -34% in March. Over a 12-month horizon, expectations were near flat at +1%, suggesting stabilisation rather than strong growth.

Regional Variations and Supply Constraints

Geographical disparities remain pronounced across the UK. The South East and South West reported the weakest price trends, whilst Scotland and Northern Ireland continued to record more positive conditions. The North of England also expressed stronger sentiment than southern regions, reflecting broader regional economic divergence.

Supply tightened significantly during June, with new instructions from vendors declining to -23% from -10% in May – the weakest reading for more than a year. This constrained supply backdrop presents both challenges and opportunities for investors seeking below-market-value deals, particularly in regions where vendor reluctance is highest.

Tom Bill, head of UK residential research at Knight Frank, highlighted ongoing uncertainty around property taxes as a key headwind. "Current propositions include a land value tax and capital gains tax reforms, which have been considered and discarded by previous administrations," he noted. "For the third year in a row, uncertainty will keep a lid on prices and sales volumes this summer."

House prices remained under pressure nationally, with the headline price balance at -33%, little changed from -34% in May. However, near-term price expectations improved to -32% from -44%, whilst 12-month expectations turned modestly positive at +8%, up from +6% previously.

Lettings Market Outperformance

The lettings sector demonstrated greater resilience than sales, with tenant demand reaching +18% – the strongest reading since May 2025. Landlord instructions remained negative at -18%, reflecting continued supply constraints driven by landlords exiting the market due to tax and regulatory concerns, particularly the Renters' Rights Act.

Projected rental growth over the next 12 months stands at approximately 2.5%, with rents described as "holding up well – and even hardening for family houses" according to Leaf. This outperformance in the lettings market may be of particular interest to buy-to-let investors analysing BTL hotspot opportunities.

Leaf predicted this pattern would persist, noting: "We expect more landlords will try to sell when existing tenants' tenancies end and are not being replaced in anything like sufficient numbers to noticeably shift the rental dial."

Looking Forward

Tarrant Parsons, RICS head of market research and analysis, offered measured optimism: "June's survey results offer some cautious encouragement that the worst of the slowdown in market activity may be beginning to pass, with several key indicators moving in a less negative direction for a second consecutive month."

However, he cautioned that any improvement remains fragile, tested by renewed domestic political uncertainty and ongoing questions about inflation and interest rate trajectories. Until greater clarity emerges on both the political backdrop and borrowing costs, housing market activity is likely to remain relatively subdued in the near term.

Investors monitoring market shifts may find value in tracking planning alert notifications to identify emerging opportunities as sentiment gradually improves across the market.

Source: Property Industry Eye.