"We expect annual house price growth to be broadly in the 2% to 4% range next year"
- Robert Gardner - Nationwide
UK house price growth slowed to 0.6% in December, down from 1.8% the previous month, as annual growth hit its weakest pace since April 2024. The deceleration marked a subdued close to a year that nonetheless demonstrated resilience in the face of elevated mortgage rates and cautious consumer sentiment.
"UK house prices ended 2025 on a softer note, with annual price growth slowing to 0.6%, from 1.8% in November, the slowest pace since April 2024," explained Robert Gardner, chief economist at Nationwide. "The high base for comparison can partly explain the slowdown (annual price growth was a solid 4.7% in December 2024), although prices fell by 0.4% month on month, after taking account of seasonal effects."
Monthly prices dropped 0.4% on a seasonally adjusted basis, influenced partly by strong growth during the same period last year.
Market shows resilience despite headwinds
The housing market in 2025 proved more robust than many expected. Mortgage approvals stayed near pre-COVID levels even as rates remained roughly three times their post-pandemic lows and households showed reluctance to make major spending commitments.
"Despite the softer end to the year, the word that best describes the housing market in 2025 overall is 'resilient'," Gardner explained. "Even though consumer sentiment was relatively subdued, with households reluctant to spend and mortgage rates around three times their post-pandemic lows, mortgage approvals remained near pre-COVID levels."
Stamp duty changes implemented in April created short-term volatility, with activity spiking in March as buyers rushed to complete transactions before higher rates took effect. However, demand recovered quickly in subsequent months.
Affordability improved gradually throughout the year as price growth lagged behind earnings increases and mortgage rates declined steadily. This supported buyer demand, particularly among first-time buyers who represented a larger share of purchases than the long-run average. High loan-to-value lending, defined as mortgages requiring deposits of 15% or less, reached its highest level in more than a decade as credit availability expanded.
Regional performance varies widely
Most regions recorded modest annual house price growth in the fourth quarter, with Northern Ireland again leading the country by a substantial margin. Prices there climbed 9.7% over the year, more than five times the 1.7% recorded across the UK as a whole during the same period and nearly three times the 3.5% growth seen in the North West, the next strongest region.
"Northern Ireland continued to outpace the rest of the UK by a wide margin, with prices increasing by 9.7% over the year," Gardner noted. "This was more than five times faster than the 1.7% recorded in the UK as a whole (in Q4) and nearly three times higher than the 3.5% recorded in the next strongest region (North West). This strong performance mirrored that in the border regions of Ireland over the same period."
Despite these gains, Northern Ireland property prices remain roughly 5% below their 2007 peak, while UK prices overall have risen almost 50% since then. A typical home in Northern Ireland now costs around 79% of the UK average, compared to about 25% above the average in 2007.
Scotland matched the broader UK trend with annual house price growth of 1.9%. Wales saw growth accelerate slightly to 3.2%, making it the only part of the UK besides Northern Ireland to record stronger price increases than in 2024.
England experienced further deceleration, with annual house price growth slowing to 1.2% from 1.6% in the third quarter. Northern England, comprising the North, North West, Yorkshire & The Humber, East Midlands and West Midlands, saw prices rise 2.3% year on year.
The North West, including areas such as Cheshire, Lancashire and Greater Manchester, topped the regional rankings in England with prices up 3.5% annually.
"Average house price growth in Southern England (South West, Outer South East, Outer Metropolitan, London and East Anglia) was similar to last quarter at 0.6%," Gardner added. "Annual price growth in London remained subdued, with prices rising by 0.7% in 2025, compared with a 2.0% rise in 2024. East Anglia was the weakest performing UK region and the only one to see an annual decline, with prices down 0.8%, compared with Q4 2024."
East Anglia was the only region to record an annual decline, with prices falling 0.8%. This marked the first regional decline since the second quarter of 2024, which coincidentally was also East Anglia with an identical 0.8% fall.
Property type performance diverges
Semi-detached properties led price growth by property type, with average values rising 2.4% year on year. Detached properties followed closely at 2.2%, while terraced homes increased 1.8%. Flats bucked the trend, declining 0.9% over the year.
The persistent weakness in the flat sector has been notable in recent years. Over the past decade, typical flat prices have increased just 18%, less than half the 41% rise seen in terraced house prices during the same period. This partly reflects London's underperformance, as the capital contains a disproportionate share of flats.
"Flats have seen noticeably weaker growth than other property types in recent years," Gardner said. "For example, over the last ten years, the price of a typical flat has increased by 18%, less than half of the rise in the price of terraced houses, which saw a 41% rise over the same period. This is partly a reflection of regional trends where London, which has a much greater proportion of flats, has underperformed the wider UK over the past decade."
Pandemic-era preference shifts toward properties offering more space have only partially reversed, continuing to weigh on flat valuations. Rising maintenance costs, ground rents and service charges have also dampened buyer appetite for this property type.
"The underperformance of flats (and London more generally) may in part be a function of the change in demand seen during the pandemic," he explained. "This resulted in a shift in preferences towards properties that offered more space and which has only partially unwound. In addition, the increased costs of maintenance, ground rents and service charges are also likely to have impacted buyer sentiment towards flats in recent years."
Outlook points to modest growth
Housing market activity should strengthen somewhat as affordability continues improving through income growth outpacing price increases and interest rates declining further. Nationwide expects annual house price growth to fall within a 2% to 4% range next year.
"Looking ahead, we expect housing market activity to strengthen a little further as affordability improves gradually (as it has been in recent quarters) via income growth outpacing house price growth and a further modest decline in interest rates," Gardner noted. "We expect annual house price growth to be broadly in the 2% to 4% range next year."
Budget changes to property taxes are unlikely to significantly affect the market. The high-value council tax surcharge won't take effect until April 2028 and will apply to less than 1% of properties in England and around 3% in London. Increased taxes on rental property income may dampen buy-to-let activity and constrain new rental supply, potentially maintaining upward pressure on private rental growth.
"The changes to property taxes announced in the Budget are unlikely to have a significant impact on the market," he said. "The high-value council tax surcharge is not being introduced until April 2028 and will apply to less than 1% of properties in England and around 3% in London."
"The increase in taxes on income from properties may dampen buy-to-let activity further and hold down the supply of new rental properties coming onto the market, which could, in turn, maintain some upward pressure on private rental growth."
Industry reaction
Nathan Emerson, CEO of Propertymark, comments, "Aspiring and current homeowners will no doubt have felt reassured heading into the end of the year, with falling inflation and base rates improving affordability and helping more buyers consider their next move during 2026."
“Given the number of policy and economic changes the housing market experienced throughout 2025, including legislative updates, mortgage rate fluctuations, and the Autumn Budget, a period of price stability is an encouraging outcome."
“Stable house prices provide a solid foundation for the year ahead, allowing buyers and sellers to make more informed decisions without the pressure of rapid price movements. As the market continues to adjust, this stability should support activity and confidence throughout 2026.”
Iain Mckenzie, CEO of The Guild of Property Professionals, said, “The latest Nationwide HPI figures show the market ending 2025 on a softer note, with annual price growth easing to 0.6%, but this should be seen more as a gentle cooling than any loss of underlying resilience. Price growth remained remarkably steady throughout the year despite pre-Budget uncertainty and a notable increase in the number of homes for sale.
“What’s particularly encouraging is that activity has held up well. With around 1.2 million homes sold in 2025, the highest level since 2022. It’s clear that steady mortgage rates and rising wages have continued to support demand, even as buyers became more price-conscious towards the end of the year.
“The Bank of England’s decision in December to cut the Bank Rate from 4% to 3.75% is a timely boost for confidence. While inflation remains above target, the latest figure coming in lower than expected will help reinforce sentiment. Lower borrowing costs, combined with a Budget that proved less severe than many feared, should underpin activity as we head into the spring 2026 selling season.
“Overall, while headline price growth has slowed, the fundamentals remain positive. We expect market momentum to strengthen in the New Year as improved affordability and greater certainty encourage more buyers and sellers to make their move.”
Jeremy Leaf, north London estate agent and a former RICS residential chairman, said, “Although the level of house price increases of the past few months have not been maintained, this is not surprising given the huge uncertainty surrounding the contents of the Budget which prevailed in the final quarter of last year at least.
“Improvements in affordability, prompted by recent falls in inflation and interest rates, as well as relief the Chancellor’s measures were not as painful as many feared, have helped to stir buyers and sellers from their seasonal hibernation.
“It is still a little early to determine the quality of the increase in the quantity of post-Christmas enquiries but early signs are encouraging."
