The UK housing market displayed a mixed performance in late 2025, with national prices rising but London experiencing a notable decline. According to the Office for National Statistics (ONS), the average UK house price increased by 2.4% annually in December 2025, though this growth slowed from the 2.8% recorded in the year to November.
Regional Variations in Property Values
The typical property value across the UK stood at £270,000 in December 2025. England saw average house prices rise to £292,000, representing a 1.7% annual increase. Wales experienced stronger growth, with prices up 5.0% to £215,000, while Scotland recorded a 4.9% rise to £191,000.
London's Market Under Pressure
Within England, the North East led with the highest house price inflation at 4.6%, though this marked a slowdown from 7.5% in the previous month. In stark contrast, London was the weakest performer, with average property values falling by 1.0% annually in December. This decline was sharper than the 0.7% decrease recorded in the 12 months to November.
Jason Tebb, president of OnTheMarket, commented on 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."
Economic Context and Expert Analysis
The housing market developments occurred against a backdrop of easing inflation. ONS figures showed the Consumer Prices Index (CPI) inflation rate slowed to 3% in January 2026, down from 3.4% in December.
Mortgage Rate Expectations
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 that leading fixed rates had remained steady in recent weeks, with expectations for further easing ahead of the March interest rate decision.
Nathan Emerson, chief executive of Propertymark, highlighted broader market dynamics: "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."
Rental Market Trends
The ONS report also detailed rental market developments. Average UK monthly private rents increased by an estimated 3.5% to £1,367 in the 12 months to January 2026, representing a £46 monthly increase compared to a year earlier.
Regional Rental Variations
England's average monthly rent reached £1,423 in January 2026, up 3.5% year-on-year. Wales saw a 5.8% increase to £826, while Scotland recorded a 2.6% rise to £1,021. Northern Ireland's typical monthly rent was £875 in November 2025, marking a 5.6% annual increase.
ONS head of housing market indices Ian Boreham observed: "The rental market continues to cool, with UK rents inflation slowing to its lowest annual rate since March 2022."
Market Outlook and Remortgaging Considerations
Iain McKenzie, chief executive of The Guild of Property Professionals, pointed to improving conditions: "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."
He noted that approximately 1.8 million households are due to remortgage in 2026, making a downward rate trajectory particularly significant for market confidence.
Nicky Stevenson, managing director at Fine & Country, offered perspective on current market dynamics: "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."
