Confidence in the state of the economy is gradually improving, which is serving to steadily boost house prices, Principality Building Society found.
The society found that the average price of a home in Wales was £238,098 in the second quarter of 2025, up 0.7% year-on-year and just 4.6% below its peak of £249,000 in 2022.
Transactions reached over 10,000 in Q2 (up 13% on last year), suggesting growing buyer confidence despite persistent cost-of-living challenges and elevated rates.
The cost of renting the average home has increased by 8.5% in the 12 months to May, boosting buy-to-let returns.
Iain Mansfield, chief financial officer at Principality Building Society, said: “The housing market in Wales continued to stabilise in the second quarter of 2025, with prices holding broadly flat compared to the start of the year.
“Encouragingly, the steady increase in transaction volumes signals increasing confidence among buyers.
“While market conditions remain challenging, a downward trend in mortgage rates is helping to create a more favourable environment for buyers. This shift is contributing to a gradual uplift in consumer confidence as we move into the second half of 2025.”
The Bank of England base rate is helping to drive activity, as the average 2-year fixed rate has dropped from approximately 5.56% to around 4.68% in 2025.
Torfaen recorded the highest quarterly price change of any local authority at 14%, driven by periodic high-value sales and limited housing supply. Carmarthen also reported an increase of 6.3%, while Flintshire saw a 3.3% quarterly rise.
Other areas, including Gwynedd, saw prices fall in the second quarter, dropping 7.3% from the first quarter of 2025. A drop likely influenced by policy shifts such as the Welsh Government’s adjustments to second home taxation and the impact of new planning regulations.
Mansfield added: “Housing supply remains a key challenge in Wales and across the country, particularly affordable and social housing.
“Policy changes including the Welsh government’s commitment to increasing the supply of affordable homes and plans to implement the recommendations of its Affordable Home Taskforce aim to address ongoing supply challenges and ease pressures on the housing market.”
