The latest RICS UK Residential Market Survey offers a modest dose of reassurance to a property sector that has spent much of 2025 in the doldrums: the downturn eased in June, with the headline net balance for house prices improving to -18%, up from -23% in May. New buyer enquiries, while still negative, climbed to -8% from -15% the previous month, suggesting that the worst of the demand collapse triggered by higher-for-longer mortgage rates and the spring stamp duty changes may be behind us. Agreed sales also showed a smaller net negative reading of -11%, compared with -19% in May.
For UK property investors, this incremental improvement matters far more than the headline numbers suggest. RICS data has historically been a reliable leading indicator, often presaging shifts in Nationwide and Halifax house price indices by one to two months. A market that is contracting more slowly is not the same as a market in recovery, but it does suggest that the aggressive repricing seen since late 2024 — when average UK house prices fell by roughly 2.1% year-on-year according to the ONS — may be approaching a floor. That distinction is critical for anyone deciding whether to buy, sell or hold in the second half of 2025.
Regional divergence remains the defining feature of this cycle. Northern cities continue to outperform the South, with Manchester and Leeds reporting near-flat to marginally positive price expectations over the next three months, buoyed by strong rental yields — averaging 6.8% in Manchester compared to a national average of 5.2% — and continued inward investment tied to devolution and infrastructure spending. Liverpool and Newcastle are showing similar resilience, with surveyors in both regions reporting new instructions outpacing the national trend, a sign that vendors are more confident of achieving realistic sale prices. London and the Surrey commuter belt tell a different story: surveyors there report the weakest sales expectations in the country, with the capital's net balance for 12-month price expectations sitting at -14%, reflecting affordability constraints, higher average loan sizes, and the lingering drag from elevated service charges and cladding-related uncertainty in the flat market.
Buy-to-let landlords should read this survey as confirmation that the sector's shakeout is not yet complete, but that pricing power is beginning to stabilise in higher-yield regions. With mortgage rates for landlords still averaging around 5.4% for five-year fixed products, according to Moneyfacts, net rental returns remain under pressure even where capital values are holding firm. First-time buyers, by contrast, may find the easing downturn creates a narrow window of opportunity: with mortgage approvals ticking up 4% month-on-month according to Bank of England data and lenders competing more aggressively on rates below 4.5%, the combination of softer prices and marginally cheaper borrowing costs is the most favourable affordability setup seen since 2022.
Commercial and institutional investors will be watching the RICS lettings and new-build components closely. Surveyors reported a continued shortfall in new instructions — down 6% net balance — which points to constrained supply persisting into autumn. For developers, this is a double-edged signal: constrained stock supports pricing on completed schemes, but the same surveyors flagged caution over build cost inflation, still running at an estimated 3.8% annually for materials and labour combined. That squeezes margins on new development just as demand shows tentative signs of returning, particularly in regional cities where land values have not corrected as sharply as in London.
Looking ahead six to twelve months, the most likely scenario is a gradual, regionally uneven stabilisation rather than a sharp rebound. Should the Bank of England proceed with further rate cuts in the autumn — markets are currently pricing in a reasonable probability of a reduction to 4% by year-end — mortgage affordability will continue to improve incrementally, supporting transaction volumes without triggering a renewed price boom. Investors should treat this RICS reading not as a turning point but as an early signal that the market's contraction phase is maturing into a plateau, with the strongest opportunities concentrated in high-yield northern cities and the weakest in overvalued southern commuter markets still adjusting to a higher cost-of-borrowing reality.
