The UK housing market rounded off 2025 on a softer note after remaining “resilient” through a volatile year, according to Nationwide’s latest house price index.
Annual house price growth slowed to 0.6 per cent in December from 1.8 per cent in November, with a 0.4 per cent fall in prices.
This took the average UK house price to £271,068 in December.
A Royal Institution of Chartered Surveyors in November showed property tax rumours and the hit to household income in the Autumn Budget had dented buyer sentiment.
Several possible tax hikes related to property were floated ahead of the Budget, before the Chancellor pushed ahead with a “high-value council tax surcharge” on all properties valued at over £2m, expected to raise £400m.
In December, it was revealed the UK’s average property tax burden as a proportion of intake amounted to 10.5 per cent while the OECD average was just 5.1 per cent, making it the fourth heaviest in the OECD’s list of 38 countries.
‘Resilient best housing market descriptor’
Robert Gardner, Nationwide’s chief economist, said: “Despite the softer end to the year, the word that best describes the housing market in 2025 overall is ‘resilient’.
He added: “Stamp duty changes that took effect at the beginning of April created volatility through the spring and summer.
“Activity spiked in March as purchasers brought forward transactions to avoid paying additional tax and this led to some softness in the following months.”
From April 2025, Rachel Reeves’ changes in her first Autumn Budget to increase the higher rate on second homes to five per cent from three per cent came into effect, leading to a surge in transactions ahead of the deadline as Brits rushed to beat the tax raid.
Alex Kerr, UK economist at Capital Economics, pointed to a combination of still-high mortgage rates and weak employment as triggering December’s 0.4 per cent decline in house prices.
This comes despite some relief for mortgage holders this year with the Bank of England chopping interest rates to a three-year low.
Capital Economics is pencilling in rates falling to three per cent, in a major boost for mortgages.
Kerr said this, alongside solid earnings growth, would help house price growth accelerate to 3.5 per cent in quarter four of 2026 and three per cent in 2027.
“That would be stronger than the consensus forecast for house price growth to average 2.5 per cent in 2026-27,” he said.