The rate of inflation for both house prices and rents in the UK has cooled, sending positive signs to the property industry.
The ONS has revealed average UK house prices increased by 3.5% to £265,000 in the 12 months to April 2025.
This was down from the 7% growth recorded in the 12 months to March 2025.
In the same update, the ONS revealed UK monthly private rents increased by 7% to £1,339 in the 12 months to May 2025.
This is slightly below the 7.4% growth recorded in the 12 months to April 2025.
Darrell Walker, group sales director at Chetwood Bank at ModaMortgages and CHL Mortgages for Intermediaries, argues the house price was to be expected given the recent stamp duty changes.
However, he stressed the importance that house prices are still up: “Consistently strong buyer demand, coupled with limited supply, means that the market remains in a strong position, albeit with some question marks around the cost of borrowing.”
Also taking positives is Paresh Raja, CEO at Market Financial Solutions.
“Ultimately, it was always going to take time for buyers and investors to adjust to the base rate rising from record-lows to 17-year highs, but all signs suggest that they have adapted over the past year or so, and the steady rise in house prices underlines that demand is still there,” said Paresh.
“If indeed we do see one or two more base rate cuts by the end of the year, the strong foundations are there for the market to really kick on from.”
In light of today’s data update, some experts are now not expecting a rate cut from the Bank of England tomorrow.
“Unfortunately, another interest rate cut this week is unlikely given the inflation figures, which is disappointing as a half-point cut would stimulate growth,” says Amy Reynolds, head of sales at Richmond estate agency Antony Roberts.
“However, there’s still plenty of money and desire to buy in the core price ranges. Surprisingly, we are seeing a rise in first-time buyer activity even though the stamp duty holiday has ended.
“Many are receiving help from family and are likely being driven by the pressures in the rental market, where demand far exceeds supply and rental listings have dropped sharply as landlords exit the sector."
“With the BoE expected to hold the base rate at 4.25% tomorrow, taking a conservative approach amidst persistent inflation and global uncertainty, there are likely to be some prospective buyers who are sitting tight and waiting for rates to come down before entering the market,” added Darrell.
The rise in average rents, which is still above inflation, was cause for alarm however.
Louisa Sedgwick, managing director of mortgages at Paragon Bank, said that though tenants will welcome this moderation the rise still highlights a shortage of stock.
“The supply of privately rented homes continues to be below the levels seen before the pandemic and substantially outstripped by demand, a dynamic that will see rents continue to rise above the rate of inflation,” said Louisa.
“The need for privately rented homes will be sustained by predicted population increases and changes to household formation, with more people choosing to live alone or remain in the sector for longer.
“For this reason, investment in stock must be encouraged and facilitated by favourable economic conditions and balanced regulation.”
In agreement is Jeremy Leaf, north London estate agent and a former RICS residential chairman.
"The inevitable result is a rise in rents with little prospect of a reduction anytime soon, particularly as the Renters’ Rights Bill will probably persuade more landlords to sell when it becomes law later in the year,” said Jeremy.
