The UK housing market remains remarkably resilient as we progress through 2025, supported by robust growth in average earnings. Despite a challenging backdrop of rising mortgage rates and increased buying costs, there are more properties on the market than we’ve seen in nearly seven years, a development that should help to moderate price inflation. Yet this abundance of inventory raises an interesting question: could buyers be missing out on opportunities in the flats market?

Across the board, market activity is thriving. Sales have risen markedly compared to last year, fuelled by a significant increase in the number of properties being listed. This surge mirrors other positive economic trends, such as strong earnings growth, higher retail turnover, and a general uplift in consumer confidence. While more buyers are entering the market, the annual rate of house price inflation has begun to ease slightly, reflecting the market’s adjustment to higher mortgage costs and the expected impact of increased stamp duty from April.

There are notable regional variations. London and much of southern England have experienced only modest increases over the past year, indicating slower economic conditions, including a recent dip in consumer confidence following the Autumn Budget and a steady rise in mortgage rates.

A striking trend this year is the rapid increase in the number of flats on the market. After a modest recovery in flat prices during 2024, more flats are now available, accounting for roughly one in every four properties listed. This surge in supply is outstripping new sales and the relatively low demand from buyers for flats, which contrasts sharply with the much stronger appetite for houses. Consequently, while the average house has enjoyed a more robust rise in value over recent years, flats have only experienced modest growth. In many cases, flat owners are facing smaller capital gains compared to those selling houses, with a significant number pricing their properties only slightly above their previous purchase price, and some even listing them at a loss.

Over the longer term, the dynamics between houses and flats have shifted markedly. The pandemic-induced search for more space drove up house prices, while ongoing concerns about the costs associated with flats,  such as service charges, ground rents, and even issues around building safety in newer developments, which have restrained their growth. In recent years, houses have appreciated much more steeply than flats, resulting in a price gap that is now the widest it has been in three decades.

Despite the apparent value of flats with monthly mortgage repayments often considerably lower than rental costs, buyers, particularly first-time purchasers, continue to favour houses. Recent trends suggest that a growing number of first-time buyers are seeking three-bedroom houses, while interest in one and two-bedroom flats has diminished. This persistent preference for houses, despite the more attractive economics offered by flats, implies that many buyers might be overlooking a potentially more affordable route to home ownership.

Looking ahead, the outlook for the housing market in 2025 remains cautiously upbeat. With more people planning to move in the coming years and average earnings growing well above inflation, buyer confidence is steadily being restored. The increased supply of properties is affording buyers greater choice and stronger negotiating power, even as the anticipated rise in stamp duty costs from April serves to keep price inflation in check. In more affordable markets outside southern England, growth is expected to be slightly above average, while overall inflation remains contained within modest limits.

In summary, while the housing market continues to display strong activity and resilience, the evolving dynamics between houses and flats, coupled with the impact of rising costs and regulatory changes, means that both buyers and sellers must navigate a landscape that is as complex as it is opportunistic.