UK Property Market Ends Year With Weak Growth

UK house prices fell unexpectedly in December, marking the weakest annual growth since April 2024, according to new data released on Friday by Nationwide Building Society.

Nationwide’s monthly house price index showed prices declined by 0.4% in December, leaving average prices just 0.6% higher than a year earlier. This compared with economists’ expectations of a 0.1% monthly increase, which would have resulted in 1.2% annual growth, based on a Reuters poll. The November annual growth rate had stood at 1.8%.

Affordability Improves Despite Slower Price Growth

Nationwide’s Chief Economist Robert Gardner said the slowdown partly reflected strong price gains in December 2024 as well as the recent monthly fall. He noted that mortgage approval levels remain broadly in line with those seen before the COVID-19 pandemic.

“With price growth well below the rate of earnings growth and a steady decline in mortgage rates, affordability constraints eased somewhat, helping to underpin buyer demand,” Gardner said.

Nationwide expects UK house prices to rise by 2% to 4% in 2026, supported by improving affordability and stable demand.

Interest Rate Cuts to Support Housing Market

Economists also point to recent monetary policy easing as a key factor likely to boost prices in early 2026. Bank of England cut its main interest rate to 3.75% from 4% on December 18, and financial markets are pricing in one or two additional quarter-point cuts in 2026.

Elliott Jordan-Doak, an economist at Pantheon Macroeconomics, said house prices were likely to pick up as the full impact of lower borrowing costs feeds through into the data.

He also noted that concerns over property tax changes eased after Rachel Reeves announced in her November 26 budget that tax increases would mainly affect the most expensive homes, rather than the wider market.

Regional Price Differences Remain Sharp

The average UK property price in the fourth quarter of 2025 was £273,077 ($367,561), but prices varied significantly by region. Homes in much of northern England averaged £168,317, while London prices averaged £529,372, rising 0.7% year-on-year.

Northern Ireland recorded the strongest house price growth, with prices up 9.7% over the past year, partly reflecting spillover demand from the Republic of Ireland. In contrast, eastern England saw the weakest performance, with prices falling 0.8% over the same period.