The UK housing market displayed a mixed performance in December 2025, with national prices rising but London experiencing a notable decline. According to the Office for National Statistics (ONS), average UK house prices increased by 2.4% annually in December, though this growth slowed from the 2.8% recorded in November. The typical property value stood at £270,000.
Regional Variations in House Price Growth
Across the UK, regional disparities were evident. In England, average house prices reached £292,000, marking a 1.7% annual increase. Wales saw a stronger rise of 5.0%, with prices averaging £215,000, while Scotland experienced a 4.9% growth to £191,000. Northern Ireland reported a 7.5% annual increase in the fourth quarter of 2025, with average prices at £196,000.
London's Unique Market Challenges
London stood out with a 1.0% annual price decline in December, a sharper fall compared to the 0.7% decrease in the previous month. This contrasts with the North East of England, which had the highest house price inflation at 4.6%, though this slowed from 7.5% in November.
Jason Tebb, president of OnTheMarket, explained London's situation: "Increased supply, low buyer demand and stretched affordability in the capital – where values tend to be significantly higher than elsewhere – are combining to keep a lid on prices."
Expert Analysis on Market Dynamics
Nathan Emerson, chief executive of Propertymark, commented on the broader market: "A slowing in the annual growth of house prices signals ongoing affordability pressures and cautious buyer sentiment. While modest price adjustments may improve access for some purchasers, reduced activity can dampen overall market confidence."
He emphasized that "ensuring a supportive lending environment and increasing housing supply will be critical to maintaining stability and encouraging sustainable levels of market activity."
Economic Factors Influencing the Market
The ONS also reported that Consumer Prices Index (CPI) inflation slowed to 3% in January 2026 from 3.4% in December. Hina Bhudia, partner at Knight Frank Finance, noted: "The combination of softer inflation data this morning and weak jobs figures yesterday raises the likelihood of two rate cuts this year."
She added: "Leading fixed rates have remained steady in the past four weeks and there has been considerable jostling for position in the middle of the market. We think this week's figures will pave the way for fixed rates to ease further in the coming month leading up to the next interest rate decision on March 19."
Rental Market Trends
The report highlighted that average UK monthly private rents increased by an estimated 3.5% to £1,367 in the 12 months to January 2026. This represents a £46 rise compared to a year earlier. Ian Boreham, ONS head of housing market indices, stated: "The rental market continues to cool, with UK rents inflation slowing to its lowest annual rate since March 2022."
In England, average monthly rent was £1,423, up 3.5% year-on-year. Wales saw a 5.8% increase to £826, while Scotland experienced a 2.6% rise to £1,021. Northern Ireland reported a 5.6% increase to £875 in November 2025.
Future Outlook and Market Sentiment
Iain McKenzie, chief executive of The Guild of Property Professionals, expressed optimism: "Encouragingly, the wider economic backdrop has become more supportive. Inflation easing to around 3% and intensifying competition among lenders are already pushing mortgage rates down, improving affordability, particularly for buyers with larger deposits."
Nicky Stevenson, managing director at Fine & Country, noted: "The fundamentals remain supportive, and while wage growth may be easing, there is improving certainty around borrowing costs. These conditions have helped keep buyers engaged, while sellers are increasingly adapting to a market that rewards realistic pricing and strong presentation."
With approximately 1.8 million households due to remortgage in 2026, experts anticipate that downward rate trajectories could provide relief and sustain market confidence, potentially leading to increased activity in the spring housing market.
