House prices expected to rise in 2026 after December dip
UK house prices slipped slightly in December, as affordability issues and the fallout from the Autumn Budget dampened buyer appetite, but industry figures expect the market to pick up in 2026.
House prices fell 0.6 per cent in the final month of 2025, bringing prices down by a further £1,789, following a 0.1 per cent drop in November.
The month also marked average house prices hitting their lowest since June 2025, costing £297,755.
While industry figures noted it was a “subdued close” to the market, overall activity remained “broadly in line” with pre-pandemic levels.
Regional performances vary
Northern Ireland remained the strongest performing nation, with prices rocketing 7.5 per cent in 2025, causing a typical property to cost £221,062.
In England, the North East had the highest annual growth rate, as property prices rose 3.5 per cent to £181,798, with the North West close behind with a 2.8 per cent rise to £245,323.
Despite remaining the most expensive region in the UK, London property prices fell 1.3 per cent over the course of 2025, averaging £539,086.
The 2026 recovery
While December’s fall in prices was credited to uncertainty caused by the November Budget, the market is poised to bounce back in 2026.
Amanda Bryden, head of mortgages at Halifax, said: “Mortgage rates are already reducing following the latest Base Rate cut and there are an increasing number of lending options available for those borrowing at a higher loan-to-value.”
Jason Tebb, president of On The Market, noted that the ongoing fall in interest rates, which last dropped to 3.75 per cent in December, has “significantly boosted confidence” among buyers.
While recognising headwinds that may damage buyer appetite, including wage inflation and flattening employment rates, Halifax expects a modest rise in house prices during the year of between one per cent and three per cent.
Karen Noye, mortgage expert at Quilter, said: “As we move further into 2026, greater clarity following the budget and on the direction of interest rates may encourage some of the decisions that were delayed at the end of last year to begin feeding back into the market, supporting a modest pick-up in activity rather than a sudden rebound.”
High end market and landlord woes
However, some industry figures noted a fall in interest rates is not enough to reduce buyer’s concerns when purchasing a home.
Nathan Emerson, chief executive of Propertymark, said: “There is still a sense of consumer caution lingering within the marketplace, mostly in respect of wider economic considerations, such as the rate of inflation and how this directly impacts affordability for many.
“While price softening may help some buyers, especially first-time buyers, a sustainable recovery will depend on further rate stability, income growth, and addressing the chronic undersupply of homes.”
Others also noted that the incoming high value council tax, dubbed the ‘mansion tax’, which will come into force in April 2028 and add a surcharge to properties valued over £2m, could weaken activity at the high end of the market.
Alice Haine, personal finance anaylst at Best Invest, also acknowledged that “Buy-to-let activity could dampen” with more landlords likely to exit the industry ahead of the introduction of property income tax in April 2027.