House prices rose by 0.3% in January, according to Nationwide, hinting at some positivity in the market. January’s growth does not fully reverse December’s -0.4% price fall, however, leaving annual price growth at just 1.0%.

Forward indicators suggest there is little momentum behind price growth in the short term. Demand in the market continued to decline across most of the country in December, according to the RICS Survey. In contrast, there was an even split amongst surveyors on supply, with as many seeing more homes come to the market for sale as saw fewer. The lack of demand against a reasonably well supplied market means price growth is likely to remain subdued over the next few months.

Despite low demand, activity in the market has been robust. Recent HMRC data shows that there were 1,212,240 transactions in 2025, 10% higher than 2024 and in line with post-Global Financial Crisis (GFC) norms. Although activity in 2025 was slightly front-loaded, as first time buyers took advantage of SDLT relief which came to an end in March, Q4 2025 was the strongest Q4 since 2022. Sales agreed were broadly in line with the 2017-19 average in January. So the homes on the market are selling, even if there is little competition amongst buyers.

The big improvements in mortgage affordability are now behind us. After four base rate cuts in 2025 and the average mortgage rate on new business falling from 4.5% to 4.1%, Oxford Economics now forecast just two base rate cuts in 2026. The forecast for a slower pace of cuts comes after inflation rose to 3.4% in December, up from 3.2% the previous month. The next cut is expected in April, but this will be largely priced in by lenders. Mortgage rates are therefore likely to be fairly stable for much of the year.

Improved confidence in the wider economy is needed to boost demand and drive price growth.  But the outlook for 2026 is relatively subdued. GDP grew by just 0.1% for the 3-months to November and unemployment stood at 5.1% with significant improvement not expected until 2027.

More localised house price data from October shows that the North West and Scotland had the greatest value growth, particularly Clackmannanshire (8.6%) and the Ribble Valley (7.5%). Ceredigion saw the most significant price falls of -9.8%, followed by Brent (-7.4%) and Rother in Sussex (-5.6%).

Annual rental growth across the UK in December was 2.0% according to Zoopla, up from 1.9%  in November. Regionally the picture remains quite mixed, the North East and North West continue to see the strongest annual rental growth of 4.2% and 2.8% respectively. The West Midlands (0.4%) and East Midlands (1.3%) have seen the weakest annual growth.

Rents have continued to grow at a slower pace than income growth, allowing affordability to improve. Net migration was lower in 2025 and first time buyer numbers were at their highest level since the GFC, at a time when unemployment was rising. This combination of factors has led to lower demand for rented homes, reducing competition amongst tenants and easing the pressure on rents.