Historically, the end of stamp duty holidays has been known to cause prolonged dips in housing market activity. However, the aftermath of the most recent holiday has proven short-lived. After a brief lull in March and April, buyer demand has rebounded strongly, with May recording the highest levels since 2021.
Year-on-year changes in buyer demand have returned to positive territory, with 3% more applicants looking to buy in Great Britain compared to the same month last year. This means that there are now 19% more house-hunters looking to buy than in May 2019, which represents a typical pre-Covid year.
This rapid recovery can be largely attributed to falling mortgage rates, which have significantly boosted buyers' purchasing power. In most cases, these lower rates have offset the increase in stamp duty bills that buyers now face following the changes implemented in April. First-time buyers have been the main beneficiaries of this trend, with high LTV mortgage rates seeing the most substantial falls, alongside more favourable affordability assessments from lenders.
The increase in demand has been felt across most of the country, with the North West seeing the biggest rise at 9% year-on-year, followed by the West Midlands (+7%) and London (+4%). Only the North East recorded fewer house hunters than last year, with a 6% decline.
Owner-Occupiers Lead the Way
Owner-occupiers, including first-time buyers and upsizers, are driving this recovery. First-time buyers showed the strongest growth, with a 4% year-on-year increase in applicants. This contrasts sharply with an 18% decline in the number of applicants seeking a second home, which has fallen to its lowest level since May 2020 during the height of the Covid-19 pandemic.
The decline in second home and investor activity is a direct response to recent stamp duty and council tax changes, including the increase in the stamp duty surcharge on second homes from 3% to 5% last November.
Pricing Holding Firm
With improved purchasing power from lower mortgage rates, prices are holding up well. The average property in England and Wales sold for 99.0% of its final asking price last month, up from 98.8% in May 2024. Just 12.8% of homes were sold for more than 5% below their final asking price, the lowest share since September 2022, just before the mini-budget.
Buyers in the East of England are finding it particularly difficult to negotiate discounts, with just 9% achieving a reduction of 5% or more below the asking price, down from 13% in May 2024. Meanwhile, buyers in the North East had more success, with 19% securing such discounts.
The £1m+ market remains the most sensitive to pricing pressures. Nearly one in three (32%) sales agreed over £1m were sold for more than 5% less than their final asking price in May, the highest proportion recorded in any May since 2020. This reflects the more discretionary nature of prime market sellers, who are often willing to wait for prices to recover rather than sell at any cost.
Longer Selling Times Despite Increased Demand
Although demand has picked up, higher stock levels mean homes are taking longer to sell. There are 4% more homes on the market across Great Britain than in May 2024, and 41% more than in May 2019. This gives buyers more choice, but also means the average home that went under offer in May had been on the market for 54 days, up from 48 days for homes sold in May 2024.
Just under a third (31%) of homes sold in Great Britain last month went under offer within 30 days, the lowest proportion recorded in any May since 2020. Homes sold over £1m recorded the biggest increase in time on market, taking an average of 56 days to sell, 11 days longer than in May 2024.
Interestingly, London homes are now more likely to go under offer within a month than the Great Britain average, with 32% of homes in the capital selling within this timeframe. This represents a reversal of the trend seen between 2016 and 2024 and reflects the fact that London is one of only two regions where there are fewer homes available to buy than last year, with stock levels down 12% year-on-year.
The London recovery is primarily driven by its more affordable suburbs, rather than Prime Central London. In Prime Central London, potential sellers run a greater risk of having to sell their homes for less than they bought them for, which significantly dampens their appetite to move and makes them less receptive to low offers. In fact, only 27% of homes purchased for over £1m a decade ago have since been sold, compared to 40% of all homes across the country.
Scotland continues to be the quickest region to sell, with over half (54%) of homes going under offer within 30 days, up from 50% in May 2024. The average home in Scotland went under offer within just 28 days, half the Great Britain average.
The South East has seen the most significant slowdown, with the share of homes selling within 30 days falling by 11 percentage points year-on-year to just 22%. Homes in this region now take a median of 77 days to sell, the longest in Great Britain.
Looking Ahead
The housing market's quick recovery from the post-stamp duty holiday lull suggests underlying strength in demand, particularly from owner-occupiers. With mortgage rates expected to remain relatively stable, this is likely to continue supporting transaction numbers and prices through the remainder of 2025.
