The latest house price data from Nationwide shows UK prices ending the year with their weakest annual growth since April, rising just 0.6% in December compared to 1.8% the previous month. On a month-to-month basis, prices fell 0.4% after seasonal adjustments, marking a subdued close to what was nonetheless a resilient year.
It's worth putting that in context. While the headline figure looks soft, the comparison is against strong growth in December 2024, when prices rose 4.7% year-on-year. The slowdown is real, but it's not a collapse — it's a cooling.
A Resilient Year, Despite the Odds
What stands out about 2025 isn't the December figure — it's that the market held up at all. Mortgage rates remained roughly three times their post-pandemic lows. Consumer sentiment was cautious. Households were reluctant to make big financial commitments. And yet, mortgage approvals stayed near pre-COVID levels, and around 1.2 million homes were sold across the year, the highest level since 2022.
Affordability improved gradually as wage growth outpaced house price increases and mortgage rates declined steadily. That created space for buyers, particularly first-time buyers, who made up a larger share of the market than usual. High loan-to-value lending — mortgages requiring deposits of 15% or less — reached its highest level in over a decade.
The stamp duty changes in April created a brief spike in March as buyers rushed to complete before higher rates took effect, but demand recovered quickly afterwards. The market absorbed the change and moved on.
London's Underperformance Continues
London saw annual growth of just 0.7% in 2025, down from 2.0% the previous year. That underperformance relative to the rest of the UK has been a consistent theme over the past decade, and it affects areas across the capital differently.
Flats declined 0.9% over the year, the only property type to fall. Over the past ten years, flat prices have increased by just 18%, less than half the 41% rise seen in terraced houses. Some of that reflects changing buyer preferences, but rising costs play a significant role too.
Pandemic-era demand for space hasn't fully reversed. Buyers still favour properties with gardens, extra rooms, and outdoor access. At the same time, rising service charges, ground rents, and maintenance costs have dampened enthusiasm for flats, particularly among buyers weighing up long-term value.
Semi-detached properties led growth at 2.4%, followed by detached homes at 2.2% and terraced houses at 1.8%. For areas with a mix of property types, that divergence matters when understanding local price movements.
What Happens Next?
The outlook for 2026 is cautiously optimistic. Nationwide expects house price growth to fall within a 2% to 4% range, supported by further improvements in affordability as wages continue rising and interest rates edge lower. The Bank of England's December cut to 3.75% should help, and with inflation coming in lower than expected, confidence is gradually returning.
Budget changes to property taxes are unlikely to have significant immediate impact. The high-value council tax surcharge doesn't take effect until April 2028 and will affect fewer than 1% of properties in England and around 3% in London. Increased taxes on rental income may dampen buy-to-let activity, which could constrain rental supply and keep upward pressure on rents.
For now, the market appears to have found a more stable footing after the volatility of recent years. Prices aren't surging, but they're not falling either. That stability, combined with improving affordability, should support steady activity through the spring selling season.
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