UK Housing Market in Focus

This morning, data from the Nationwide House Price Index indicated that property prices rose less than expected, easing to their lowest rate of growth since July 2024.

This came as the House Prices Index registered a 2.1% increase on an annualised basis, easing 1.4 percentage points from the previous month’s figure. When looking at the index on a monthly basis, prices fell 0.8%, brining the average property price to £272,751.

According to the building society’s chief economist “the softening in price growth may reflect weaker demand following the increase in stamp duty at the start of April”. (In April 2025, the government rolled back the temporary Stamp Duty Land Tax reliefs that had been in place since 2022, meaning that buyers are now facing higher upfront costs, potentially delaying or deterring purchases). This comes as heightened economic uncertainty is also being cited as a reason why prospective buyers may be more apprehensive about using savings.

They continued however by suggesting that “we still expect activity to pick up as the summer progresses, despite ongoing economic uncertainties in the global economy, since underlying conditions for potential homebuyers in the UK remain supportive”.

Significant regional disparities were evident, with property prices rising 9.7% (annualised) across Northern Ireland against a 4.5% rise in Scotland, a 2.6% increase in Wales and a more marginal 2.5% appreciation in England.

Today’s report is also set against a wider backdrop of the government’s plans to build 1.5 million new homes over the course of this Parliament (through to 2030). The government hopes to implement this though reforms to the National Planning Policy Framework, putting more of the burden on local councils though reinstating mandatory housing targets, and training 60,000 construction workers to address skills shortages.

However, according to the government’s latest statistics, between April 2024 and March 2025, there were 38,308 housing starts and 36,872 housing completions through Homes England programmes (excluding London). While its unclear how many homes have been built across the whole of the UK over the first year of the parliament, it’s apparent that the scale of the 1 million targets will be such that major accelerations will be needed.

Across the channel, the Eurozone’s HICP print this morning showed signs of increasing over June to the ECB’s 2% target level. This marked an increase of 10bps from the previous month’s print and came in line with market expectations.

On a monthly basis, inflation across the currency union increased by 0.3%, indicative of a 30bps rise from May’s figure of 0%.

This morning’s reading follows the ECB cutting their benchmark interest rates by 25bps at their latest monetary policy meeting. During the meeting, policy makers downwardly revised their inflation expectations from 2.3% to 2% over 2025, and from 1.9% to 1.6% over 2026.

Looking ahead, money markets are implying that just one 25bps cut has been fully priced in for the ECB, as the Frankfurt adjust to easing inflationary pressures alongside concerns around growth.

It was a mixed picture from UK PMI Manufacturing figures this morning, with data from S&P suggesting that manufacturing output continued to ease, but at a slower rate.

This came as the S&P Global UK Manufacturing PMI survey registered 47.7, coming in line with market expectations. This marked a five-month high and extended the recovery from the near one-and-a-half-year low seen in March, but nonetheless was the eighth consecutive month of a decline in manufacturing.

New export business also contracted for the 41st straight month, with reduced demand from the US, Europe, and China. Here, tariff uncertainty was also reported to be undermining both foreign demand and buyer confidence.

That said, the survey noted that the orders-to-inventory ratio rose to its highest level since August and inflation readings eased, while some further positive news was seen with the business optimism index reaching a four-month high.

Notwithstanding these signs of improvement, one Director at S&P Global noted that “any hoped-for stabilisation remains fragile and subject to potential headwinds that could severely impact demand, supply chain reliability and future growth prospects, as manufacturers continue to caution their optimism with concerns about heightened geopolitical tensions, weak global markets, tariff uncertainties and fears over the direction of future government policy”.

As markets look for further insight into the health of the US economy, attention now turns to US Manufacturing PMI figures released at 14:45 this afternoon.