UK Housing Market Shows Resilience as Prices Rise Despite Ongoing Affordability Challenges

Introduction: The Significance of the UK Housing Market

The housing market remains a critical barometer of the UK economy, affecting millions of households, investors, and policymakers. As we approach the end of 2025, UK house prices rose by 4.9% in the year to January 2025, demonstrating resilience despite persistent affordability challenges. Understanding current housing trends is essential for prospective buyers, sellers, and anyone seeking insight into the nation’s economic health.

Current Housing Market Conditions

The average UK house price was £269,000 in January 2025, which is £13,000 higher than 12 months ago. However, the market shows signs of cooling, with the price of a typical UK home rose by 4.1% year on year in January, a modest slowing in the annual pace of growth compared with December.

Regional variations remain significant. The highest annual growth was in the North East, where prices increased by 9.1% in the year to January 2025, whilst London saw prices increased by 2.3% in the year to January 2025. Transaction volumes have improved, with in January 2025, the estimated number of transactions was 95,000, which is 14.4% higher than 12 months ago.

Challenges Facing Homebuyers

Affordability remains a pressing concern. House prices remain high relative to average earnings, with the first-time buyer house price to earnings ratio standing at 5.0 at the end of 2024, still well above the long run average of 3.9. These challenges are particularly acute for younger buyers, with around 40% of first-time buyers requiring some assistance raising a deposit.

Market Outlook and Forecast for 2026

Looking ahead, experts predict a market “reset” rather than a dramatic rebound. While lower mortgage rates and more inventory will bring some buyers back, this will be a reset year, not a rebound year. Mortgage rates are expected to ease gradually, with the rate averaging 6.3% for the year, down from a 2025 average of 6.6%.

After nearly four months of slower activity in late 2025, the market is expected to gain fresh momentum as we move into 2026, though affordability pressures will continue to shape buyer behaviour across different regions.

Conclusion: A Market in Transition

The UK housing market demonstrates notable resilience despite significant headwinds. Whilst annual price growth remains positive and transaction volumes show improvement, affordability constraints continue to challenge first-time buyers and young families. The year ahead promises gradual improvement rather than dramatic change, with regional disparities likely to persist. For prospective buyers and sellers, understanding these dynamics and local market conditions will be crucial for making informed decisions in 2026.