"Despite the softer end to the year, the word that best describes the housing market in 2025 overall is 'resilient'"
- Robert Gardner - Nationwide
Annual house price growth decelerated sharply to 0.6% in December, marking the weakest performance since April 2024 as the market closed out a year characterised by resilience against a backdrop of elevated borrowing costs and subdued consumer confidence.
The slowdown from November's 1.8% annual growth rate reflected both strong comparative figures from December 2024, when prices rose 4.7% annually, and a 0.4% month-on-month decline after seasonal adjustments.
"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," said 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."
Demand holds firm despite challenges
The market proved surprisingly robust throughout 2025. Mortgage approvals remained close to pre-pandemic levels even as rates stayed roughly three times higher than their post-COVID lows and households maintained a cautious approach to major financial commitments.
"Despite the softer end to the year, the word that best describes the housing market in 2025 overall is 'resilient'," Gardner noted. "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."
April's stamp duty changes created a temporary disruption. Buyers rushed to complete purchases in March before the new rates took effect, causing activity to surge then soften in the following months. The underlying demand picture remained stable, however, with transactions recovering as the year progressed.
Improving affordability provided crucial support for buyers. Price growth consistently lagged wage increases while mortgage rates declined gradually, creating more favourable conditions. First-time buyers accounted for an above-average share of transactions, aided by expanded credit availability. Lenders approved mortgages requiring deposits of 15% or less at the highest rate seen in over a decade.
"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," he explained. "Indeed, the first-time buyer share of house purchase activity was above the long-run average, supported by easier credit availability, with the share of high loan-to-value lending (i.e. with a deposit of 15% or less) reaching its highest level for over a decade."
Northern Ireland dominates regional rankings again
Fourth quarter data showed most regions recording modest annual price increases, though Northern Ireland once again stood apart with exceptional growth. Prices there climbed 9.7% over the year, dwarfing the 1.7% UK-wide figure for the same period and nearly tripling the 3.5% recorded in the North West, England's strongest performer.
"Northern Ireland continued to outpace the rest of the UK by a wide margin, with prices increasing by 9.7% over the year," said Gardner. "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."
The gains haven't restored Northern Ireland prices to previous peaks. Values remain about 5% below the 2007 high, while UK prices overall have climbed almost 50% since then. A typical Northern Ireland home now costs around 79% of the UK average, down from approximately 25% above the average in 2007.
"Despite these significant price gains, house prices in Northern Ireland are still around 5% below the all-time high recorded in 2007, while UK prices are almost 50% higher over the same period," Gardner added. "As a result, the price of a typical home in Northern Ireland is currently around 79% of the UK average, whereas in 2007 it was around 25% higher."
Scotland's 1.9% annual growth broadly aligned with the UK trend. Wales recorded 3.2% growth, a slight acceleration that made it the only part of the UK apart from Northern Ireland to see stronger price growth than in 2024.
"Scotland broadly matched the wider UK trend in 2025 with annual house price growth of 1.9%," he said. "Meanwhile, Wales saw a slight increase in annual house price growth to 3.2% and was the only other part of the UK, apart from Northern Ireland, to see stronger house price growth in 2025 than in 2024."
Growth across England continued to decelerate, slowing to 1.2% from the third quarter's 1.6%. Northern England, encompassing the North, North West, Yorkshire & The Humber, East Midlands and West Midlands, recorded 2.3% annual growth. Within this area, the North West led England's regions with 3.5% growth, driven by areas including Cheshire, Lancashire and Greater Manchester.
"England saw a further slowing in annual house price growth to 1.2%, from 1.6% in Q3," Gardner noted. "Average prices in Northern England (comprising North, North West, Yorkshire & The Humber, East Midlands and West Midlands) were up 2.3% year on year, with the North West (which includes areas such as Cheshire, Lancashire & Greater Manchester) the top performing region in England – with prices up 3.5% year on year."
Southern England, comprising the South West, Outer South East, Outer Metropolitan, London and East Anglia, saw 0.6% growth, consistent with the previous quarter. London recorded subdued 0.7% annual growth, down from 2.0% in 2024.
"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%," he explained. "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 alone recorded declining prices, falling 0.8% annually. This represented the first regional decline since the second quarter of 2024, which also saw East Anglia prices drop 0.8%.
"The only region to see an annual decline was East Anglia, where prices fell by 0.8% (this was the first annual decline in a region since Q2 2024, which coincidentally was also East Anglia and a fall of 0.8%)," Gardner said.
Flats remain weakest property type
Semi-detached properties led growth by property type, with prices rising 2.4% year on year. Detached homes followed at 2.2%, while terraced properties increased 1.8%. Flats declined 0.9%, extending a pattern of underperformance.
"Our most recent data by property type shows that semi-detached properties saw the biggest percentage rise in prices during 2025, with average prices up 2.4% year on year," Gardner commented. "However, detached properties saw similar growth of 2.2%, with terraced only marginally weaker at 1.8%. However, flats saw a small year-on-year decline of 0.9%."
The gap between flat and house price growth has widened significantly over time. During the past decade, typical flat prices rose just 18%, less than half the 41% increase recorded for terraced houses. London's concentration of flats and its relative underperformance partly explain this trend.
"Flats have seen noticeably weaker growth than other property types in recent years," he 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 shifts in buyer preferences toward properties with more space continue affecting flat values, with demand patterns only partially reverting to pre-COVID norms. Escalating maintenance costs, ground rents and service charges have also deterred potential flat buyers.
"The underperformance of flats (and London more generally) may in part be a function of the change in demand seen during the pandemic," Gardner 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."
Market expected to strengthen moderately
Activity should increase somewhat as affordability continues improving through wages rising faster than prices and mortgage rates declining further. Annual house price growth is forecast to fall between 2% and 4% 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," said Gardner. "We expect annual house price growth to be broadly in the 2% to 4% range next year."
Budget property tax changes should have a limited market impact. The high-value council tax surcharge doesn't begin until April 2028 and affects less than 1% of English properties and roughly 3% of London properties. Higher taxes on rental income may reduce buy-to-let activity and constrain rental property supply, potentially sustaining upward pressure on rents.
"The changes to property taxes announced in the Budget are unlikely to have a significant impact on the market," he noted.
"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."
