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UK Housing Market: Regional Divergence Widens

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  Published in House and Home on Thursday, January 8th 2026 at 5:05 GMT by London Evening Standard

Halifax, UK - January 8th, 2026 - The UK housing market continues to exhibit a marked regional divergence, with a strong performance in Northern Ireland sharply contrasting with declines in London and the South East, according to the latest data released today by Halifax. While the national average saw a modest increase in December, the underlying trends reveal a complex picture of shifting fortunes across the country.

The average UK house price edged up by 0.4% in December, reaching GBP287,308. However, this slight gain masks a concerning year-on-year decline of 2.7% compared to December 2022, signaling a broader cooling trend. This marks a continuation of the slowdown observed in recent months, with November seeing a 0.9% drop.

The real story, however, lies in the dramatic regional disparities. London, traditionally the powerhouse of the UK property market, experienced the most significant annual price fall, dropping by 4.5%. The South East, closely mirroring London's performance, saw prices decrease by 3.9%. This decline extends a trend identified in 2023 by Rightmove, which also reported a 4.5% fall in London prices over the year.

In stark contrast, Northern Ireland emerged as a clear outlier, registering a robust 3.7% increase in house prices year-on-year. This boom defies the national trend and highlights the unique dynamics at play in the region. Kim Kinnaird, Director of Halifax Mortgages, attributes this success to a combination of factors. "A number of factors are likely to be at play in Northern Ireland, including a relatively undersupplied housing market and strong demand," Kinnaird explained. The limited availability of properties, coupled with consistent buyer interest, has driven prices upwards, creating a buoyant market.

The contrasting fortunes of London and the South East stem largely from affordability issues and the prevalence of higher-value properties. The area's housing stock is heavily weighted towards more expensive homes, making it particularly vulnerable to economic headwinds and interest rate fluctuations. As economic uncertainty persists, potential buyers in these regions are proving more cautious, leading to reduced demand and price corrections. This segment of the market is especially sensitive to changes in disposable income and broader economic conditions.

Looking ahead, experts anticipate a subdued housing market throughout 2024 and into early 2025. Andrew Harvey, a Senior Economist at Capital Economics, predicts an overall decline of around 2% in UK house prices this year, adding a cautious caveat: "The outlook is highly uncertain, however, and depends on the path of interest rates and the broader economy." The ongoing debate surrounding interest rates and inflation continues to cast a shadow over the housing sector, making accurate predictions challenging.

The Growing North-South Divide

The widening gap between Northern Ireland and London/South East is fueling concerns about a growing regional economic divide. The robust growth in Northern Ireland offers a bright spot in an otherwise sluggish market, but the struggles of the South raise questions about the long-term sustainability of this imbalance. This divergence is likely to be exacerbated by differing economic conditions and government policies across the regions.

Impact of Interest Rates and Inflation The Bank of England's monetary policy remains a key driver of the housing market. High interest rates continue to dampen demand by increasing mortgage costs, impacting affordability for potential homeowners. Coupled with persistent, though moderating, inflation, the financial pressures on households are contributing to the overall slowdown. A potential easing of interest rates later in 2024 could provide some relief, but the timing and extent of any cuts remain uncertain.

The Halifax data reinforces the need for a nuanced understanding of the UK housing market. A 'one-size-fits-all' approach to policy and forecasting is no longer sufficient. Policymakers must consider the specific regional dynamics at play and tailor their strategies accordingly to ensure sustainable and equitable growth across the country.