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UK Housing Market: Further Price Declines Expected in 2025-2026

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  Published in House and Home on Thursday, January 8th 2026 at 3:37 GMT
      Locale: UNITED KINGDOM

London, January 8th, 2026 - The UK housing market is expected to continue its period of adjustment, with further price declines anticipated in many regions, according to the latest analysis from Halifax, the nation's largest mortgage lender. While the initial 2024 forecast of a 2-5% dip largely materialized, evolving economic conditions suggest a continuation of these trends into 2025 and the beginning of 2026, though at a potentially slower rate. The overall picture remains one of subdued demand, affordability challenges, and a cautious outlook for significant price growth.

Halifax's most recent projections, released today, indicate a further overall decline of 1-3% in house prices across the UK for 2025, with a stabilization expected in late 2025 and early 2026, contingent on economic factors. This builds upon the 2024 correction following the more volatile period of 2023, which saw a mix of modest gains and losses throughout the year. The primary drivers remain consistent: elevated mortgage rates and a persistent affordability crisis impacting prospective homebuyers.

Regional Variations: The South-East Defies the National Trend

Despite the national downturn, a key theme emerging from Halifax's data - and one that continues to hold true - is the resilience of the South-East of England. While not immune to the wider market pressures, the South-East is consistently predicted to 'outperform' the rest of the UK, with expectations of prices remaining relatively stable or experiencing only minimal declines. This is attributed to a combination of factors, including strong local economic conditions, limited housing supply in desirable locations, and a different demographic profile compared to other regions. The East of England is also showing more resilience, though to a lesser degree than the South-East.

In contrast, regions further north and in Scotland continue to face more significant headwinds. While Northern Ireland experienced robust growth in 2023 (3.7% year-on-year according to Halifax), the momentum is expected to slow considerably. Areas with a greater reliance on specific industries vulnerable to economic downturns are also likely to see steeper price falls. London, while historically a strong performer, continues to grapple with affordability issues and has seen sustained price declines, a trend expected to persist.

Mortgage Rates and Affordability: The Central Challenge

The current high interest rate environment remains a significant barrier to homeownership and is a key factor suppressing demand. While predictions of significant rate cuts in the immediate future are uncertain, even a modest reduction would likely provide some relief to potential buyers and stimulate activity. However, the underlying issue of affordability remains. Wage growth, while present, has not kept pace with house price increases over the long term, and the cost of living crisis continues to strain household finances.

Looking Ahead: A Slow and Uncertain Recovery

Halifax's managing director, Kim Kinnaird, emphasizes the ongoing uncertainty. "While we anticipate a stabilisation in prices towards the end of 2025, a sustained recovery in house price growth is unlikely in the short term," she stated. "The market is highly sensitive to economic shocks, and any worsening of conditions - such as a recession or further increases in interest rates - could trigger further declines."

Recent data from Rightmove, showing a 1.9% fall in asking prices in December 2025 (the largest drop in a decade), reinforces this cautious outlook. The shift in market dynamics has created a more balanced landscape, with buyers having greater negotiating power. Sellers are increasingly having to adjust their expectations and consider more realistic pricing to secure a sale.

The long-term prospects for the UK housing market remain positive, driven by a fundamental shortage of housing supply. However, addressing this supply issue will require sustained government investment and innovative approaches to planning and construction. Until then, the market is likely to remain volatile and subject to economic fluctuations.