UK Housing Market Resilient as Wider Economy Stutters

Knight Frank describes 2025 so far as a year of three phases for the UK economy: a busy first quarter as businesses moved ahead of US tariffs and April tax rises, a subsequent lull, and a recovery that has so far disappointed. GDP, retail sales and employment figures have all been weaker than hoped, and consumer sentiment suggests households are bracing for more tax rises in the autumn Budget.

The housing market followed a similar pattern, with a quiet spell after the April stamp duty deadline, but its recovery has been stronger than expected and more convincing than the wider economy’s. Bank of England data showed mortgage approvals in June were close to the five-year average. Swap rates have risen slightly as inflation expectations increased, but remain around last October’s levels, so there are still plenty of mortgages below 4%.

Higher-value discretionary markets are more price sensitive. James Cleland, head of Knight Frank’s Country business, said June and July were better than he had expected in late May. However, supply still clearly exceeds demand: there were 5.7 new buyers for every new listing in Q2, the lowest ratio since early 2018, meaning sellers need to price realistically.

A Bank of England rate cut was seen as highly likely, with markets expecting another in November, although inflation at 3.6% has proved stubborn. Pepperstone analyst Michael Brown, speaking on the Intelligence Talks podcast, expects inflation to ease but says uncertainty over where future tax rises will fall remains a major concern.

Source: Knight Frank Newcastle, original article (6 August 2025)