UK house prices rose modestly in January, recovering some of the ground lost at the end of last year, although economists say the market is yet to show signs of a full post-Budget rebound.
According to figures from Nationwide Building Society, average house prices were 1% higher in the year to January, outperforming economists’ expectations for a 0.7% annual increase. On a monthly basis, prices rose by 0.3%, following a 0.4% fall in December.
The late-year dip came as buyers and sellers paused activity amid speculation around potential property tax changes ahead of the Chancellor’s Autumn Budget. With the Budget delivered at the end of November and the market traditionally slowing into December, many transactions were pushed into the new year.
Economists remain cautious about reading too much into January’s figures. Alex Kerr, UK economist at Capital Economics, said the January rise only partially reversed December’s fall and suggested there was still “little evidence of a post-budget rebound”.
Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics, described the market as “steady, if unspectacular”.
However, expectations for the year ahead are more upbeat. Capital Economics forecasts house prices will rise by around 3.5% in 2026, supported by easing mortgage rates, looser lending criteria and continued wage growth. That compares with the 2.5% rise forecast by most other economists.
Robert Gardner, Nationwide’s chief economist, said housing market activity “is likely to recover in the coming quarters” as affordability continues to improve.
Nationwide estimates that first-time buyers are now in the strongest affordability position for more than a decade. The typical first-time buyer home costs around 4.7 times average earnings, down from almost six times during the post-pandemic “race for space”, and below the long-term average of 4.9.
Lower mortgage rates have also eased monthly repayment pressures. The average first-time buyer is now spending about 32% of take-home pay on mortgage costs, down from around 38% in 2022 and broadly in line with historical norms.
Improving affordability has helped first-time buyers account for close to 55% of all UK property transactions last year — the highest proportion since UK Finance began tracking the data in 2005. More than a third of those buyers received help with their deposit, typically through family gifts, loans or inheritance.
Regional disparities remain stark. First-time buyer prices in Scotland and the North East are below three times average earnings, while in the South East and South West they exceed five times earnings. In London, the ratio remains above seven, although it has fallen for two consecutive years.
