Our monthly property market review is intended to provide background to recent developments in property markets as well as to give an indication of how some key issues could impact in the future.
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The second half of the year should be smoother for the UK housing market, according to Knight Frank.
The first six months of 2025 brought some uncertainties, with Trump’s trade tariffs, ongoing geopolitical conflict and Stamp Duty changes. However, things may be looking up.
Buyer activity seems to be recovering after Stamp Duty thresholds reverted to higher levels in April. This initially caused a 37% decline in transactions; however, in May there was a smaller drop of 17%, suggesting that activity is picking up. Supply still outweighs demand, as the number of new homes for sale between January and May was 15% higher than the five-year average.
Experts believe that there will be further cuts to Bank Rate this year, which would help boost the market. However, there are concerns that the government will announce more tax rises in the Autumn Budget to create financial headroom.
Property Inspect reported that demand for new builds remained stable in Q2 2025.
New-build demand was 18.2% in quarter two, only 0.2% less than Q1. This stability is driven by strong performance in cities, with demand highest in Southampton, where over a third (35%) of new-build homes are sold subject to contract (SSTC). Portsmouth is second on the list with 28%, followed by Sheffield (20.6%), Glasgow (19.5%) and Bristol (19.1%).
On the other hand, demand was weakest in Swansea, where only 1.1% of new builds were under offer. The Welsh city is joined at the bottom by Liverpool, where 3% of new homes were SSTC. Aberdeen saw the largest quarterly drop in interest, where demand fell by 10%.
Commenting on the research, Siân Hemming-Metcalfe, Operations Director at Property Inspect, said, “Activity in many major cities highlights that buyers are still transacting, even in the face of higher price points”.
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The number of homes being flipped has dropped to the lowest level since 2013, according to Hamptons.
Property flipping – buying homes to renovate and quickly resell – has become less common. In Q1 2025, only 2.3% of homes sold in London had been bought within the last year, a 3.6% annual decrease. Although the average gross profit from flipping a property rose this year to £22,000, it is still below the peak of £38,000 seen in 2022. This drop is likely due to a slowdown in house price growth.
Flippers seem to be retreating from the South, with only 1.5% of homes in London resold within a year. In the capital, 23% of the average profit from flipping went towards Stamp Duty, which has likely been a deterrent for investors. Meanwhile, the North East is a popular spot, where flipped homes accounted for 4.7% of all sales in Q1.
The City of London investment market continues to show signs of recovery, according to property experts Savills.
May saw the highest number of monthly deals so far this year, with nine transactions worth a total of £181.9m. The largest deal in May was a £47.5m transaction from Whitbread, who plan to convert 87,000 sq. ft of office space into a 400-bedroom hotel on the South Bank.
At the end of May, the year-to-date volume was £1.62bn; although this is 24% lower than the five-year average, it is almost three times higher than 2024. Meanwhile, Savills’ City prime yield remains unchanged at 5.25% for the twenty-second consecutive month.
Market conditions look promising for the rest of the year, following the Bank of England cut to Bank Rate in May which should help boost momentum. There is also a growing quantity of available stock, £1.1bn of which is currently under offer.
Analysis from Knight Frank shows that investment in the Scottish commercial property market decreased by 20% in H1 2025.
There was £750m of investment in the first six months of the year, notably lower than the five-year average of £925m. This decline is reflective of trends across the UK and is likely caused by geopolitical tensions and changing policies.
Hotels were the strongest performing asset class for the first time in recent years, with £213m worth of transactions, followed by retail (£207m) and offices (£152m). The most active buyers were private investors, accounting for 40% of transaction volumes, while international investors made up a third (32%) of investment.
Head of Scotland Commercial at Knight Frank, Alasdair Steele, commented, “In a volatile world, commercial property remains an attractive option for investors – and Scotland remains good value within the UK, which itself is widely seen as a safe haven from an international perspective.”
12-month capital value expectations – broken down by sector
– Prime industrial and prime office assets are envisaged to post gains of close to 2% in capital value
– Respondents foresee a generally flat outlook for prime retail capital values
– For alternative sectors, data centre valuations take the lead, projected to rise by close to 4%.
– Respondents’ twelve-month projections stand at 2.2% for prime industrials and 2.1% for prime offices
– For prime retail, respondents now envisage a flat to marginally negative trend in rents over the year ahead
– Secondary office and retail rents are expected to fall by a respective 2.6% and 3.2% over the year to come.
All details are correct at the time of writing (16 July 2025)
Source: RICS, UK Commercial Property Monitor, Q1 2025
It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK.