The UK housing market concluded 2025 with a noticeable deceleration, as annual price growth eased to just 0.6% in December, down from 1.8% in November, according to the latest data from Nationwide Building Society.
Market Resilience Amidst a Soft Landing
Robert Gardner, Nationwide's chief economist, described the overall market in 2025 as 'resilient', despite the subdued finish. He pointed out that mortgage approvals stayed near pre-pandemic levels, even with consumer caution and mortgage rates remaining significantly higher than their post-Covid lows.
The average UK house price dipped by 0.4% month-on-month, settling at £271,068 in December. This monthly fall contributed to the slowest annual growth rate recorded since April 2024.
Gardner highlighted that stamp duty changes in April 2025 created short-term volatility. 'Activity spiked in March as purchasers brought forward transactions to avoid additional tax, leading to some softness in the following months,' he explained. However, underlying demand proved robust throughout the year.
Regional Divergence: Northern Ireland Soars, East Anglia Declines
The regional picture was one of stark contrast. Northern Ireland was the standout performer, with house prices surging by 9.7% over the year—more than five times the UK's overall Q4 growth rate of 1.7%. Despite this remarkable gain, prices there remain roughly 5% below their 2007 peak.
In contrast, East Anglia was the only region to experience an annual price decline, with a drop of 0.8%. This marked the first annual fall in any UK region since the second quarter of 2024.
Other notable performances included:
- Wales: Achieved annual growth of 3.2%, one of only two areas (with Northern Ireland) to see stronger growth in 2025 than 2024.
- North West: The next strongest English region with 3.5% growth.
- Scotland: Broadly matched the UK trend with 1.9% growth.
Outlook for 2026: Gradual Improvement Expected
Looking forward, Nationwide anticipates a modest strengthening in housing market activity. This optimism is based on a gradual improvement in affordability, driven by incomes rising faster than house prices and a further expected modest decline in interest rates.
The lender forecasts that annual house price growth will be in the range of 2% to 4% in 2026.
Commenting on recent fiscal policy, Gardner stated that the property tax changes announced in the Budget are 'unlikely to have a significant impact on the market.' He noted the high-value council tax surcharge does not start until April 2028 and will affect fewer than 1% of properties in England.
However, he added that increased taxes on property income could further dampen buy-to-let investment. 'This may hold down the supply of new rental properties, which could, in turn, maintain some upward pressure on private rental growth,' Gardner concluded.
