The UK housing market concluded 2025 with an unexpected dip, as new data reveals prices fell at the year's end despite predictions of a modest increase.
December Dip Defies City Forecasts
According to the latest figures from Nationwide Building Society, the average UK house price dropped by 0.4% in December 2025. This decline brought the typical property value down to £271,068, confounding financial analysts in the City who had anticipated a month-on-month rise of 0.1%.
The building society also reported that the annual rate of house price growth slowed significantly to just 0.6% in December. This marks the weakest year-on-year reading recorded since April 2024, indicating a notable cooling in the market as the year closed.
Budget Timing and Market Resilience
Experts point to specific economic events that influenced buyer behaviour. Ian Futcher, a financial planner at wealth management firm Quilter, noted that while December is traditionally quieter, the seasonal slowdown was amplified in 2025 by the delayed budget. "With key fiscal decisions pushed later into the year, many prospective buyers and movers chose to put plans on ice until they had clarity on the policy landscape," Futcher explained.
Robert Gardner, Nationwide's chief economist, highlighted the market's underlying resilience despite headwinds. "Even though consumer sentiment was relatively subdued, with households reluctant to spend and mortgage rates around three times their post-pandemic lows, mortgage approvals remained near pre-Covid levels," Gardner stated.
The market experienced volatility earlier in the year following stamp duty changes introduced in April, with further uncertainty created by the November budget timing.
First-Time Buyers and Future Outlook
Amid the mixed signals, there was positive news for those trying to get onto the property ladder. Nationwide reported that the first-time buyer share of house purchases is above the long-run average. Furthermore, the proportion of mortgages advanced with a deposit of 15% or less has reached its highest level in a decade.
This aligns with recent analysis from Halifax, which suggested affordability for new buyers was at its strongest since late 2015 when prices are measured against average incomes.
The monetary policy shift in December, when the Bank of England cut interest rates from 4% to 3.75%, is seen as a potential catalyst for renewed activity. The market anticipates further rate cuts in the coming year. "The Bank of England’s decision to cut rates in December marks an important turning point," said Futcher. "With the budget now behind us and greater clarity on the direction of interest rates, we may finally see at least some of the housing plans that were shelved late last year being dusted off."
In summary, while the UK property market finished 2025 on a softer note, it demonstrated notable resilience through a turbulent period defined by fiscal changes and economic uncertainty, with a cautiously optimistic outlook for the year ahead.
