Activity in the housing market is stronger than it was 12 months ago, defying the usual seasonal slowdown seen during the summer, according to Zoopla’s latest house price index.
Buyer demand is 11% higher, accompanied by an 8% increase in agreed sales. There are currently a record number of homes on the market, an average of 37 per estate agent branch, with more buyers actively looking to finalise deals before the start of the school holidays and the August slowdown.
Recent changes to the way lenders assess mortgage affordability have been a catalyst for the increased activity. Home buyers using a mortgage can now borrow up to 20% more, at the same rate, than they could just three months ago. This has encouraged more buyers to try and secure a home purchase before the summer and is why buyer demand and sales agreed are higher across all regions and countries of the UK.
Higher stamp duty costs create a drag on price inflation
While the market is seeing increased activity, higher stamp duty costs in England and Northern Ireland, following the end of temporary reliefs in April, are creating a significant drag on price inflation. A total of 83% of homeowners now pay stamp duty on new purchases, compared to less than half (49%) before April 2025. The extra cost is up to £2,500 per sale, around one% of the average UK home price. Buyers will be looking to reflect these increased buying costs in what they offer for homes, ultimately impacting agreed sale prices.
Stamp duty costs also vary between existing homeowners and first-time buyers. Stamp duty costs have a greater impact on buyers in southern England more than other areas, contributing towards an additional drag on price inflation. First-time buyers are charged lower rates and tend to buy cheaper homes, however 41% are now liable for stamp duty compared to just 19% before April 2025. The greatest impact is on those buying in London and higher value parts of the South East. Based on the average first-time buyer price in London the stamp duty cost is £6,100 compared to £0 before April.
UK house price inflation slows as buyers market continues
In addition to the effects of higher stamp duty costs, the growth in the number of homes for sale is contributing to the slowdown in UK house price inflation.
Zoopla's house price index reveals the annual rate of price inflation has now fallen to just 1.3%, with the average UK house price sitting at £268,400, a modest £3,350 increase from a year ago. This national slowdown comes despite increased market activity and reflects a major shift, with a 12% increase in national housing supply re-enforcing the buyer's market, boosting choice and keeping offers competitive. Although price growth is up from 0.4% last June, it has nearly halved from the 2.1% seen just six months ago in December 2024.
While the overall pace of growth has nearly halved from 2.1% from six months ago, regional disparities are stark. Northern regions of England, Scotland, and Wales are experiencing faster house price inflation, typically between 2-3% annually. Northern Ireland is a standout, with prices up 6.1%, 7.8% in Belfast, albeit from a lower base. In contrast, southern regions of England are seeing the weakest price inflation, consistently below 1%. This ranges from 0.2% in the South East and London to 0.3% in the South West. Truro, Torquay and Exeter are registering some of the biggest price falls outside of London, at -1.3%, -1.2% and -1.1% respectively.
Richard Donnell, executive director at Zoopla, said: “The housing market is broadly in balance. We're seeing healthy levels of demand and sales, but this isn't sparking faster price inflation. In fact, more homes for sale, particularly across southern England, is re-enforcing a buyer's market, keeping price rises in check. Many more home buyers are paying stamp duty since April and want this extra cost reflected in the price they pay. While mortgage rates are holding steady, less stringent affordability testing has boosted buying power and is supporting more sales despite increased uncertainty.
“At the start of the year, we predicted house prices would rise just two%, at the lower end of forecasts for house price inflation. Prices are on track to be one% higher over 2025, half the level forecast. Greater supply of homes for sale and mortgage rates remaining higher than expected are the key reasons for weaker growth. Low house price inflation is not a bad thing so long as there is enough market confidence for people to list their homes and make bids to buy homes.”
