The UK housing market ended 2025 on a surprisingly weak note, with prices falling month-on-month and growth slowing sharply, according to new figures from one of the country's largest lenders.
Unexpected December Dip Points to Softer Market
Nationwide Building Society's House Price Index (HPI), released on 2 January 2026, showed that property values experienced an unexpected contraction at the end of the year. The annual rate of house price growth slowed significantly to just 0.6% in December, down from 1.8% in November. This represents the slowest annual growth pace since April 2024.
More strikingly, after adjusting for seasonal effects, prices actually fell by 0.4% between November and December. Robert Gardner, Nationwide's Chief Economist, attributed part of the slowdown to a high base for comparison, noting that annual growth was a solid 4.7% in December 2024. However, the monthly decline indicates underlying softness in market activity.
Regional Divide: Northern Ireland Bucks UK Trend
The data revealed a stark regional divide in performance across the UK. For the third consecutive year, Northern Ireland was the strongest performing region, with prices rising by 9.7% over the course of 2025.
David Stirling, an Independent Financial Adviser at Belfast-based Mint Wealth Ltd, commented on Northern Ireland's resilience. "Northern Ireland outperformed the rest of the UK in 2025 for the third year running, supported by lower average prices, strong demand and a chronic lack of housing supply," he said. He noted that demand has held firm, especially among first-time buyers, despite wider economic pressures.
In contrast, East Anglia was the weakest performing region in 2025, with prices declining by 0.8% over the year.
Expert Outlook: Market Stagnation Likely for 2026
Property and mortgage experts responding to the data were largely pessimistic about a quick rebound, forecasting that the slowdown will likely extend through 2026. They cited a combination of high interest rates, recent changes to stamp duty, a lack of incentives for new buyers, and political uncertainty as key factors suppressing activity.
Elliott Culley, Director at Switch Mortgage Finance, stated: "House prices slowing in the majority of the UK is unsurprising as higher interest rates, coupled with the changes to stamp duty and lack of incentives for first-time buyers has left the market in neutral." He added that with no imminent government interventions for the housing market, prices will probably continue to stall. While anticipated interest rate cuts in 2026 might provide some stimulus, Culley questioned whether they would be sufficient to reignite significant buyer demand.
Justin Moy, Managing Director at EHF Mortgages, highlighted the cautious stance of many potential purchasers. "There has been a noticeable slowdown within the property market for several months, with many buyers awaiting news of the late Budget before committing to any purchase," he explained. Moy identified first-time buyers as the crucial catalyst for recovery, pointing out that with mortgage rates at their best level in three years and high affordability, the mortgage industry has done much of what it can to support the market.
The consensus suggests that the UK property market is entering a period of prolonged stagnation, with the return of first-time buyers and the trajectory of interest rates being the critical factors to watch in the months ahead.
