MARKET INSIGHT
UK property market update for august 2025
August 29, 2025 • Author: Richard Bradstock
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The biggest news in the UK market this month: Supply of new build homes in London. We’ve seen lots of figures flying around on LinkedIn and agency blogs so we’ve taken a thorough look at the data to bring you a comprehensive update on what is an all-time low in the capital’s housing supply and what this means for investors looking to buy and those who already own. We’ll also dig into the new lending rules which we’re predicting will have a big impact on house price growth (spoiler alert, a positive, steep price increase) and we’ll finish with an update from Birmingham, just described by two of the UK’s most entrepreneurial landlords as one of the best places to invest in the UK.
Let’s get stuck in…
A Capital Crime? London’s housing supply.
The current dearth of newbuild starts in London has been described as ‘the perfect storm’ for housebuilding. We’ve heard it from the Mayoral office itself, countless commentators and the VP of the G15, the organisation that represents London’s largest social housing providers. For buy-to-let landlords and investors, this perfect storm looks to lead to blue skies, unlike George Clooney’s ill-fated Captain Billy Tyne.
What’s going on?
Is the level of London housing really at an all time low?
Well, yes, it appears it is. There have been quite a few figures flying about on Linked In, but as at the time of writing, August 26th 2025, the Planning London Data hub shows that so far in the 2025/26 year there have been 2,128 residential starts, 2,894 residential completions and 14,345 planning approvals for new homes. Considering that City Hall estimates 88,000 new homes are needed to meet residential demand every year in London (that’s everything, private, affordable etc), it seems we are a little, ahem, behind (understatement of the century).
Housing Shortage Projection
London is facing an unprecedented housing crisis with severe supply constraints.
Private Housing Supply: 70% Drop from 2014 Peak.
In short, London is facing a shortage of 170,000 new homes by 2027. CBRE estimates that between now and then no more than 31,800 homes will be built. London’s housing delivery is the lowest of any UK region and its private housing supply – the likes of which our investors and clients buy – is at a 70% drop from its 2014 peak (Knight Frank). Yes, 70% lower.
How has this happened?
Straight from the horse’s mouth, the chief executive of the Peabody Trust described the current housebuilding market as:
"The most challenging environment we’ve ever worked in."
"Standards have changed since Grenfell, the cost of building has gone up and the shortage of labour is a real problem.”
"Our ability to support and fund development has come down because we're spending more money on building safety and maintenance and management of homes."
We know firsthand how impactful the Building Safety Act and Gateway 2 has been on housing completions with delayed sign offs and developments, ready to complete just sitting there waiting for local authorities to sign them off and release them, frustrating us and our clients alike and tighter lending conditions haven’t helped either - but we’ll circle back to those shortly.
What does this mean for investors?
Well, back to the fundamentals of supply and demand, if something is scarce, its value will be driven up and that is why if you are in a position to buy in London then you should, as now is the opportune time before sharper price rises hit from next year on. It seems the squeeze will be felt acutely in 2027, but already, we are seeing a pick-up in sales in London, particularly from UAE-based buyers who are witnessing a strengthening sterling against the dirham and are therefore seeking to take advantage of an present exchange rate that won’t slide their way in the coming year. Also the four year foreign income and gains exemptions known as the FIG Regime has peaked overseas interest in the capital.
The number of planning applications reflect a more positive trend, 28,000 in the year up to Q1 2025, which is 46% higher than the previous year, but still 46% below the 2014 peak, which doesn’t do a lot to help the current pipeline. And, CBRE has heavily caveated this figure, warning that many of these applications could be resubmissions on the back of the new safety regulations, so in actual fact, the number of new developments been given planning approvals seems unknown.
Who is currently active and buying in the UK market?
UK Property Market Buyer Breakdown - Start of 2025
| Buyer Category | Percentage of Sales | Description/Notes |
|---|---|---|
| Build To Rent (BTR) Sector | 37% | Most active players in London market (+15% volume YoY). Investment up 54% year-on-year |
| UK Buyers | 22% | Second largest actor in the sector. Highest activity since Help To Buy Scheme ended - indicates authentic market demand |
| Overseas Buyers | 19% | International purchasers |
| Affordable Housing Supply | 19% | Purchases switched to address supply shortage of affordable homes |
| Bulk Deals | 3% | Large-scale bulk purchase transactions |
| Total | 100% | Complete market breakdown |
The Build To Rent boys are the most active players in the market, accounting for 37% of new home sales/purchases in London, up 15% on their volume the previous year. What does this tell us? Rental homes in London are a top and coveted asset to own. Investment in the BTR sector is up a whopping 54% year on year. This signals to us more strongly than ever the place and need for individual landlords in this market.
UK buyers make up the second largest actor in the sector, accounting for 22% of sales which is excellent – a fundamental indicator of authentic market demand. The number of UK buyers active in the market at the start of 2025 was more than any other time since the Help To Buy Scheme ended. As for the rest of the pie, 19% are overseas buyers, 19% of purchases have been switched to plug the abyss in supply of affordable homes and the remaining 3% is made up of bulk deals.
Looking at overseas buyers, the volume of purchases remains in line with 2024, but slightly below that of 2023 because of ‘alternative but fast-growing markets such as Dubai.’ This is a topic we’ll come back to in the coming weeks. Comparing the UK and Dubai markets is a bit like comparing apples and oranges. In case you are unclear where we stand, if you want a medium to long-term, safe, capital appreciating investment then the UK wins every time. And we’d exercise caution on anyone currently looking at Dubai.
Gregory Lewis founder of AirDXB Group recently posted on LinkedIn showing data that 90,000 units had launched in H1 2025 – that’s 15,000 a month, (which really should hammer home the lack of supply in London, a city with more than double the population 3.9 million to 9.7 million people). This hubris shrouds the fact that rental transactions in DXB have dropped dramatically in Q2 2025; a 12.9% drop in total contracts between Q1-Q2 and a 20.4% crash in renewals (data from Property Monitor). We know which market we’d choose to invest in, and it isn’t Dubai.
Why will prices rise steeply in London?
Apart from the scarcity of supply factor, we’re also predicting a rise in London house prices – and the wider UK – as a result of recent regulatory changes that will boost mortgage borrowing power, with looser stress tests and more flexibility on high loan-to-income lending. This should support stronger demand, particularly in affordability-constrained markets such as London and the South where borrowers will be able to, on average, borrow between £14k-£40k more. We saw Savills upgrade its house price growth forecasts for 2027–29 from 13% to 18.5%, alongside rising transaction volumes. For investors, this points to a smoother market ahead with greater capacity for both capital growth and liquidity.
What are the recent regulatory changes on UK mortgages?
There are two major changes which will undoubtedly positively impact activity in the UK housing market. They are:
1
FCA Stress Testing (March 2025)
The FCA advised banks not to be overly cautious with stress tests. Lenders should test borrowers against likely future fixed rates (rather than high reversion rates), leading to looser criteria.
2
Bank of England Loan-to-Income (LTI) Rules (July 2025)
Banks may now have more than 15% of new mortgages at an LTI above 4.5, provided the sector-wide average stays below 15%.
What this means in Plain English…
LTI (Loan-to-Income) ratio = how many times a borrower’s income they can borrow. For example, if you earn £50,000 a year and borrow £250,000, your LTI is 5.
The previous rule, banks were only allowed to issue 15% of their new mortgages at an LTI above 4.5 (so only a small share of very high-borrowing loans).
The new rule (July 2025 states that Individual banks can now go above that 15% limit themselves, but across the whole banking sector, the average share of high-LTI loans must still remain below 15%.
What this means for banks, borrowers and the housing market
More flexibility for banks: Some lenders (often those serving younger professionals, London buyers, or high earners) can take on more high-LTI loans without breaking the rules, as long as other banks remain more conservative.
Impact on borrowers: More people – especially in expensive markets – may be able to borrow more relative to their income. This makes it easier for first-time buyers and movers in high-cost areas to get on the ladder.
Impact on the housing market: This loosening could, increase demand in high-price regions (London, South East); support house price growth because buyers can stretch further and increase overall transaction numbers as affordability barriers soften.
It’s now easier to see how critical the shortage of supply, particularly in London and the South East is, as barriers to buy that have plagued the market post-Covid are lifted, competition for the limited stock will increase, sending prices upward.
Will people actually be able to borrow more?
Here are three quick, concrete examples.
Mortgage Borrowing Capacity Comparison
How much extra could you borrow with different loan-to-income ratios?
Single Borrower
Couple
And finally…
Birmingham made The Times ‘Best Places for Landlords to Buy – Our Expert Guide’, a much-coveted list monitored by buy-to-let landlords. Experts Rob Dix and Rob Bence (private landlords and co-founders of The Property Hub) described Birmingham as offering a balanced mix of immediate returns and long-term growth potential. As the article is behind a paywall, we’ve summarised what is says:
Despite broader challenges in the buy-to-let sector such as rising taxes, mortgage rates, and tenant protection reforms, the Midlands (including Birmingham) remain attractive for seasoned landlords seeking high-growth and high-yield opportunities.
The Big City Plan, dubbed the UK’s largest urban regeneration project, is highlighted as a key driver of future value. It has already transformed the city centre and plans to deliver 50,000 new jobs and major infrastructure upgrades around Curzon Street and Smithfield.
The rental market is thriving, with average rents in Birmingham rising 6.8% year-on-year, outperforming both regional and national figures.
There’s also strong rental yield and upside potential in the suburbs and surrounding towns with good transport links to the city centre.
Birmingham stands out amid UK buy-to-let headwinds due to its combination of robust regeneration, job creation, and rental market strength.
Whether you're looking for steady rental income now or capital appreciation later, the city strikes a compelling balance.
Landlords with a longer investment horizon could see significant gains, especially in areas benefiting from urban development and improved connectivity.
Check out our current Birmingham investment opportunities here including prime investment, Centenary Square with deposits from £41,500 and a potential 28% rise in capital value predicted by 2029, exactly the ‘immediate’ return Dix and Bence are talking about.
Conclusion: The RPA View
Low supply of new homes, relaxed lending criteria, lowering interest rates = rising UK house prices. With the pinch on supply most felt in 2027, for the best ROI, investors should buy now before prices begin to skyrocket.
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About the author
RPA’s founder, Richard has worked in residential development investment for 20 years and oversees the general running of the business ensuring the RPA Group retains true to its founding principles. Over his career Richard has built an incredible network of international property investors and like-minded industry professionals.
Founder & Managing Director
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