UK Housing Market 2025 Review & 2026 Forecast: Nationwide Report

2025 Market Overview: Resilience Amidst Challenges

The UK housing market demonstrated remarkable resilience throughout 2025, defying subdued consumer confidence and elevated mortgage rates. Despite these challenges, mortgage approvals remained close to pre-pandemic levels, signaling a robust underlying demand, according to Nationwide’s chief economist, Robert Gardner.

The year saw some initial volatility, particularly in the spring and summer, influenced by stamp duty adjustments implemented in April. This led to a surge in activity in March as buyers expedited transactions, followed by a slight dip in subsequent months. However, the fundamental strength of the market persevered, with demand holding firm.

House price growth largely aligned with expectations. Annual increases moderated from 4.7% at the close of 2024 to 2.1% by mid-2025, settling at 1.8% in November. Consequently, property prices concluded the year nearing the record highs observed in the summer of 2022.

Affordability Boosts Buyer Interest

Improved affordability played a crucial role in sustaining buyer interest. With house price growth lagging behind earnings increases and mortgage rates experiencing a steady decline, financial constraints for buyers eased. This environment particularly benefited first-time buyers, whose market share surpassed the long-term average, supported by more accessible credit options. Lending with high loan-to-value ratios (deposits of 15% or less) reached its highest point in over a decade.

Regional Spotlight: A Tale of Two Markets

Regionally, Northern Ireland emerged as a standout performer, recording an impressive average annual house price growth of 11% in the first nine months of the year. This significantly outpaced the 3% UK average and even exceeded the North of England’s 5.1%. Despite this strong performance, prices in Northern Ireland remain approximately 6% below their 2007 peak, contrasting sharply with the UK average, which has risen by nearly 50% over the same period. The typical home in Northern Ireland now costs about 79% of the UK average, a notable shift from 2007 when it was about 25% higher.

Meanwhile, Wales generally mirrored the broader UK trend, while Scotland experienced slightly stronger house price appreciation. London, however, registered the weakest growth, averaging 1.3% in the first nine months. This contributed to a broader trend where northern English regions saw greater price increases than their southern counterparts, narrowing the price differential to its lowest since 2013. The average price of a home in northern England is now almost 58% of that in the south, a significant rise from the approximate 48% low in 2017.

Forecast for 2026: Modest Growth Ahead

Looking ahead to 2026, Nationwide anticipates a slight strengthening of housing market activity. This improvement is expected as affordability continues its gradual enhancement, driven by income growth surpassing house price increases and a further modest reduction in interest rates. The forecast for annual house price growth next year is projected to be within the 2% to 4% range.

Impact of Recent Property Tax Changes

Recent property tax changes announced in the Budget are not expected to have a substantial immediate impact on the market. A high-value council tax surcharge, scheduled for April 2028, will affect less than 1% of English properties and about 3% in London. However, increased taxes on property income might further moderate buy-to-let activity, potentially limiting the supply of new rental properties and maintaining some upward pressure on private rental growth.