UK house prices continued to rise on an annual basis in the year to December, but momentum in the market weakened towards the end of the year. New figures from the Office for National Statistics show that prices increased by 2.4 per cent compared with the same period last year, while falling by 0.7 per cent month on month. This left the average UK property valued at around £270,000.
The data highlights a growing divide between regions, with London and parts of southern England experiencing the sharpest slowdown. London was the only part of the UK to record a yearly decline in prices, with values dropping by 1 per cent to an average of £551,294. Analysts suggest this reflects a combination of stretched affordability, the impact of last autumn’s Budget and the usual slowdown in activity seen towards the end of the year.
In contrast, northern regions continued to show stronger growth. The North East led the way with an annual increase of 4.6 per cent, underlining how demand remains more resilient in areas where property is still relatively affordable. Across England as a whole, average house prices rose by 1.7 per cent to £292,000.
Elsewhere in the UK, Wales saw prices climb by 5 per cent over the year to reach £215,000, while Scotland recorded a 4.9 per cent increase, taking the average home value to £191,000. Northern Ireland delivered the strongest annual growth of all, with prices rising by 7.5 per cent in the fourth quarter of the year to an average of £196,000. These figures point to a market that is far from uniform, with performance varying widely depending on location.
Commenting on the latest data, Ian Futcher, financial planner at Quilter, said the housing market had ended 2025 on a subdued note. While annual price growth remained positive, the monthly fall in December suggested activity had slowed. He added that London performed worst over the year, influenced by a combination of policy changes and seasonal factors.
Affordability remains a major challenge for buyers, particularly in the South. Higher mortgage rates over the past year, along with a rise in the number of homes coming onto the market in some areas, have dampened demand. Richard Donnell, executive director at Zoopla, said house price growth had weakened across the country, with London and southern England seeing the softest performance.
Donnell also noted that buyer demand was still around 8 per cent lower than at the same time last year. He suggested that regions offering better value for money and tighter supply conditions are more likely to see continued price growth, while higher-priced markets may struggle to regain pace in the short term.
The rental market is also showing signs of cooling after several years of rapid increases. Average private rents across the UK rose by 3.5 per cent in the year to January, reaching £1,367. This represents the slowest annual growth rate since March 2022 and suggests that pressures on tenants may finally be beginning to ease.
In England, the average monthly rent climbed to £1,423 in January 2026, up £48 or 3.5 per cent compared with a year earlier. Wales recorded stronger growth, with typical rents rising by 5.8 per cent to £826 per month. Scotland saw a more modest increase of 2.6 per cent, bringing the average monthly rent to £1,021. The ONS noted that this was the weakest annual rise in Scotland for more than four years, although differences in data collection methods mean direct comparisons with other UK nations should be treated with caution.
Northern Ireland’s most recent figures, covering November 2025, showed average monthly rents of £875, representing a 5.6 per cent rise year on year. While the pace of rental inflation is slowing, rents continue to increase month by month, keeping pressure on household budgets.
Nathan Emerson, chief executive of Propertymark, said that a slowdown in rental growth could offer some relief for tenants. However, he warned that it may also reflect shifts in local supply and demand rather than a lasting change in market conditions. He called for measures to encourage continued investment in the private rented sector to ensure there is enough housing available.
Wider economic trends are also shaping the outlook for the housing market. UK inflation fell to 3 per cent in January, down from 3.4 per cent in December, strengthening expectations that interest rate cuts may be on the horizon. Hina Bhudia, partner at Knight Frank Finance, said that softer inflation data combined with weaker employment figures increased the chances of two rate cuts later this year.
Mortgage rates have already eased slightly from their recent highs, and competition among lenders is beginning to intensify. However, experts caution that any improvement in affordability is likely to be gradual. High living costs and lingering economic uncertainty mean many buyers are still approaching the market cautiously.
Overall, the latest figures suggest the UK housing market is entering a more stable but slower phase. Prices are still rising on an annual basis, but the pace of growth has clearly cooled, particularly in London and the South. With rents also showing signs of moderation and interest rates potentially set to fall, the coming months could bring a period of adjustment rather than a sharp rebound.
For homeowners, buyers and investors alike, this shift points to a market that is becoming more balanced after years of volatility. While challenges remain, especially around affordability, the easing of inflation and mortgage rates could help restore confidence as 2026 progresses.
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