High supply keeps UK house price growth in check

Knight Frank has raised its 2025 UK house price forecast from 2.5% to 3.5%, a modest upgrade given that markets now expect Bank Rate to be around 3.5% in a year's time, compared with more than 4.25% anticipated in early January. Annual growth is currently just under 3.5% according to Nationwide and Halifax, and Knight Frank expects it to move broadly sideways.

The firm cites higher inflation and uncertainty over possible tax rises in the autumn Budget as restraints, but also a growing imbalance between supply and demand. In April there were 5.4 new prospective buyers for every new sales instruction, the lowest ratio outside Christmas periods since mid-2018. In the first four months of the year, new instructions were about a fifth above the five-year average (excluding 2020), while new buyers were about a fifth below.

Supply has increased because of the March stamp duty deadline, sales plans delayed by last year's election and Budget, some financial pressure as mortgage rates normalise, and landlords selling ahead of legislative changes. The stamp duty deadline drove a 104% annual jump in March transactions, yet the buyer-to-instruction ratio for the first quarter was 7.4, against 8.8 a year earlier.

Knight Frank expects stronger price growth in the autumn than in the spring, particularly if lending rules are relaxed. Andrew Groocock, chief operating officer of its estate agency business, said buyers can take their time given the choice available, so sellers need to price correctly from the outset or risk a property going stale.

Sellers should also note that values may be lower than when they bought: prime central London prices are down 19% over ten years, and prices in the firm's Country markets above £750,000 are 8% below their 2022 peak. The average achieved price as a share of the initial asking price has fallen from 97.1% in April 2022 to 91.7%.

Source: Knight Frank Newcastle, original article (20 May 2025)