The UK housing market proved more resilient than many expected in 2025 and is well positioned for a steady year ahead, according to Nationwide’s chief economist Robert Gardner.
Despite subdued consumer confidence, higher living costs and mortgage rates still well above post-pandemic lows, housing activity held up strongly throughout the year. Mortgage approvals remained close to pre-Covid levels, underlining the depth of underlying demand even as households remained cautious about wider spending.
Stamp duty volatility but stable demand
Changes to stamp duty at the start of April injected volatility into the market. Activity surged in March as buyers rushed to complete purchases before higher taxes took effect, followed by a predictable cooling in the months that followed. However, Gardner said this largely masked a stable underlying trend, with demand holding up well across most of the year.
House prices moved broadly in line with expectations. Annual growth slowed from 4.7% at the end of 2024 to 2.1% by mid-2025 and eased further to 1.8% by November. Even so, prices finished the year close to the all-time highs last seen in the summer of 2022.
Crucially, affordability improved as earnings growth outpaced house price inflation and mortgage rates edged down. This supported buyer confidence, particularly among first-time buyers, who accounted for a larger-than-average share of transactions. High loan-to-value lending, where deposits are 15% or less, reached its highest proportion for more than a decade, reflecting easier access to credit.
Northern Ireland leads regional performance
Regional performance in 2025 was marked by a clear north-south divide. Northern Ireland was the standout performer, recording average annual price growth of 11% in the first nine months of the year. That was nearly four times the UK average and more than double the growth seen in the next strongest region, northern England.
Despite these gains, house prices in Northern Ireland remain around 6% below their 2007 peak, while UK prices overall are nearly 50% higher than at that point. The typical Northern Irish home is now priced at about 79% of the UK average, compared with being roughly 25% higher than the UK average before the financial crisis.
Wales broadly tracked the UK average in 2025, while Scotland saw slightly stronger growth. London was the weakest-performing region, with annual growth averaging just 1.3% in the first nine months. As a result, price growth in northern regions continued to outpace the south, narrowing the long-standing regional price gap to its smallest level since 2013.
What to expect in 2026
Looking ahead, Nationwide expects housing market activity to strengthen modestly in 2026 as affordability continues to improve. Gardner forecasts annual house price growth in the range of 2% to 4%, supported by income growth continuing to outstrip house price inflation and a further, gradual easing in interest rates.
The property tax changes announced in the Budget are unlikely to materially affect the market in the near term. The proposed high-value council tax surcharge does not come into force until April 2028 and will apply to a small minority of homes. However, higher taxes on rental income may further dampen buy-to-let investment, potentially constraining rental supply and maintaining upward pressure on rents.
Overall, Gardner believes the market enters 2026 on a solid footing. While affordability remains stretched for some buyers, the resilience shown in 2025 suggests the housing market is adapting to a higher-rate environment and remains underpinned by steady demand and improving financial conditions.
