EuroWire, LONDON: UK house prices rose less than expected in 2025 as growth slowed sharply at the end of the year, with a surprise decline in December dragging the annual gain below economists’ forecasts, according to the latest Nationwide Building Society data released on Thursday. Nationwide reported that average UK house prices increased by only 0.6 percent in 2025, marking the weakest annual growth since April 2024. The figures came in below expectations, reflecting subdued activity in the housing market during the final months of the year. On a monthly basis, prices fell by 0.4 percent in December, reversing a small increase seen in November and signaling continued fragility in the market’s recovery. The average price of a home stood at approximately £271,500 in December, down from just over £272,800 in November.
The data showed that the December fall offset earlier modest gains, resulting in an annual growth rate significantly below the forecast of around 1 percent. Economists had anticipated a slight uplift driven by easing mortgage rates, but the year ended on a softer note than projected. The slowdown in late 2025 followed a year of uneven momentum across the housing sector. Early in the year, property prices showed tentative signs of stabilization after steep declines through 2023. However, higher borrowing costs during much of 2025 continued to weigh on buyer demand, despite expectations of improved affordability in the second half. The December dip suggested that the market remained sensitive to fluctuations in mortgage rates and broader economic conditions. Nationwide’s figures indicated regional variations across the United Kingdom. Northern Ireland recorded one of the strongest performances, with prices rising close to double digits on an annual basis.
Scotland and parts of northern England also saw moderate gains, while London and the South East experienced minimal growth. The capital’s property market remained largely flat, with average prices increasing by less than 1 percent over the year. Several southern regions even registered slight year-on-year declines as affordability pressures persisted. Despite the subdued headline figures, overall market activity remained steady in terms of transaction volumes. Mortgage approvals continued to edge higher through the final quarter, reflecting some resilience among homebuyers and lenders. Nationwide noted that while demand remained below pre-pandemic levels, supply constraints in certain areas provided a degree of support for prices. Still, the data suggested that the housing market had yet to return to consistent or broad-based growth.
Nationwide data highlights subdued property price growth
The broader economic backdrop in 2025 added to the housing market’s challenges. Inflation moderated compared with the previous year, but wage growth and living costs continued to affect household budgets. The Bank of England held its base rate steady through much of the second half of the year before signaling potential easing in 2026. Mortgage lenders responded by gradually reducing fixed-rate deals, although the effect on affordability was limited in the short term. In terms of regional affordability, the data underscored the gap between income growth and property values. The average first-time buyer in the South of England still required a deposit exceeding £60,000, compared with around £30,000 in northern regions. Nationwide said affordability remained stretched despite slower price growth, particularly for those attempting to enter the market without significant savings or family support.
Analysts observed that housing supply constraints also influenced price trends in 2025. The number of new homes completed across the UK remained below government targets, while planning approvals declined compared with the previous year. Although housing starts increased slightly in the final quarter, overall construction activity was lower than in 2024, contributing to continued pressure on stock levels. Across the UK, the property market appeared to stabilize but not strengthen decisively by year’s end. Estate agents and mortgage brokers reported a modest pickup in inquiries in November, but the December downturn suggested that market confidence remained tentative. The data indicated that many potential buyers continued to delay purchases amid expectations of lower borrowing costs in 2026.
Supply shortages continue to influence property values
Nationwide’s report concluded that while the December decline was unexpected, the broader picture for 2025 reflected a year of subdued but relatively stable conditions. Annual growth of 0.6 percent marked a stark contrast to the declines seen in 2023, when prices fell by more than 1 percent, but it remained well below the longer-term average. The housing market enters 2026 with momentum that remains fragile but stable. Average prices are still around 3 percent lower than their mid-2022 peak, according to Nationwide data. With household finances under pressure and affordability stretched in many regions, the pace of recovery is expected to remain measured. Transaction levels are likely to reflect ongoing caution among buyers and sellers, as many households continue to adjust to tighter lending conditions and the lingering effects of higher borrowing costs throughout much of 2025.