UK House Prices See Strongest Decline Since 2023

Posted by Connect UK Auctions on 7th July 2025 -

UK house prices fell at their fastest pace in more than two years this June, a sign that buyers are feeling the squeeze from rising taxes and economic uncertainty. According to a report by Bloomberg, citing data from Nationwide Building Society, the average home price dropped 0.8% to £271,619—the sharpest monthly decline since February 2023.

This downturn came as a surprise to many economists, who had predicted a modest 0.1% rise. Instead, the market responded sharply to recent policy changes and broader financial pressures, leaving prices just 2.1% higher than a year ago—a decline in real terms when adjusted for inflation.

 

Stamp Duty Hike Slows Demand

A key factor behind the slowdown is the increase in stamp duty that took effect in April. This has added thousands of pounds to the cost of buying a home for many Britons. The tax hike appears to have weakened demand, particularly among first-time buyers and those trading up the property ladder.

Robert Gardner, Chief Economist at Nationwide stated “The softening in price growth may reflect weaker demand following the increase in stamp duty at the start of April”.

 

Economic Headwinds Weigh on Buyer Confidence 

While wage growth remains robust, many households are refraining from dipping into their savings amid elevated mortgage rates, ongoing cost-of-living pressures, and geopolitical uncertainties, including trade tensions. These concerns appear to be outweighing the benefits of improved earnings.

Still, the market isn’t without resilience. Mortgage approvals unexpectedly rose in May, according to figures from the Bank of England—suggesting that interest in home buying hasn’t dried up entirely.

 

Regional Trends: London Slows, Terraced Homes Rise

The data also reveal significant regional and property-type disparities:

• London saw annual house price growth of just 1.4%, well below inflation and among the weakest in the country.
• Flats are struggling the most, with prices stagnating after growing 2.3% in the previous quarter.
• Terraced houses, by contrast, are outperforming, with a 3.6% year-on-year price increase.

As highlighted in the Bloomberg report, this may reflect a shift in buyer preferences toward more space and better value amid economic uncertainty.

 

Is A Rebound on the Horizon?

Despite the June drop in house prices, economists remain cautiously optimistic about the rest of 2025. According to Bloomberg Economics, falling mortgage rates and rising household incomes could help buoy the market in the months ahead.

Economist, Ana Andrade, has said “Improved affordability, driven by growing household incomes and further falls in quoted rates, should ensure decent price gains ahead”. She forecasts annual growth of about 2.5% over the second half of the year.

 

Final Thoughts

While June’s figures reflect a market under pressure, they don’t necessarily signal a prolonged downturn. The effects of the April tax changes are still rippling through the system, but a more supportive interest rate environment later this year could help restore momentum.

For now, buyers and sellers alike are proceeding with caution—watching for signs of stability in what has become an increasingly unpredictable housing landscape.