Nationwide Decline: Largest Monthly Dip in House Prices Observed in More Than Two Years
In the second half of 2025, the UK housing market is expected to experience continued, modest growth with cautious optimism. Most expert forecasts converge around a 3.5% to 4.0% increase in prices for the full year 2025, signalling steady gains but at a moderate pace.
Key factors supporting this outlook include annual growth projections for 2025, which are around 3.5% to 4%. Knight Frank has revised its forecast upward from 2.5% to 3.5%, while Savills projects 4% growth. Nationwide data showed a 3.5% annual increase in house prices as of May 2025, with a slight monthly rise of 0.5%, suggesting momentum continuing into the second half of the year.
Economic factors such as wage growth outpacing inflation, falling mortgage rates, and easier finance conditions are underpinning confidence and buyer activity. These factors are partly due to Bank of England base rate cuts down to 4.25%. However, potential risks remain, including potential inflationary pressures, unemployment, or borrowing costs increases that could dampen demand.
Regional disparities are expected to persist, with stronger growth predicted in more affordable northern regions (up to 5%) compared to slower gains in London and the South East due to affordability constraints. The North was the top-performing region in England, with prices up 5.5% year on year in the second quarter of 2025. Conversely, East Anglia was the weakest performer among English regions, with annual growth of 1.1% in the second quarter of 2025.
The market is described as a “buyers’ market,” meaning sellers may need to price strategically to attract buyers, indicating a somewhat balanced or competitive environment rather than rapid price surges. Across England overall, house prices were up 2.5% year-on-year in the second quarter of 2025, a slight softening from the 3.3% annual rise seen last quarter.
The average price of a UK home, according to Nationwide, is now £271,619. This figure reflects a slight increase from the average UK property price of £265,000. Wales saw a 2.6% increase in house prices in the second quarter of 2025, while Scotland recorded a 4.5% annual rise. London has the highest average house price, at £532,449. Meanwhile, the North has the cheapest average house price, at £167,259.
Mortgage approvals for house purchases increased to 63,000 in May, the first time this year. This increase suggests that there are signs of life returning to the mortgage market. However, the market is still digesting the stamp duty reforms in April, but they are expected to stabilize activity over the coming months.
Despite these positive indicators, the unemployment rate remains low, earnings are rising at a healthy pace in real terms, household balance sheets are strong, and borrowing costs are likely to moderate. These factors contribute to the overall positive outlook for the UK housing market in the second half of 2025.
[1] Knight Frank (2025). UK Residential Market Forecast 2025-2026. [online] Available at: https://www.knightfrank.com/research/uk/residential-market-forecast-2025-2026 [Accessed 1 July 2025].
[2] Savills (2025). UK Housing Market Outlook 2025-2026. [online] Available at: https://www.savills.com/en-gb/research/articles/uk-housing-market-outlook-2025-2026 [Accessed 1 July 2025].
[3] Nationwide (2025). House Price Index. [online] Available at: https://www.nationwide.co.uk/house-price-index [Accessed 1 July 2025].
[4] Office for National Statistics (2025). House Price Index, UK: April 2025. [online] Available at: https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/april2025 [Accessed 1 July 2025].
[5] Zoopla (2025). UK City House Price Index. [online] Available at: https://www.zoopla.co.uk/house-prices/uk/ [Accessed 1 July 2025].
In the context of the UK housing market outlook for the second half of 2025, Knight Frank forecasts a growth of 3.5% while Savills projects a 4% increase in property prices for the year, signaling a continued, modest growth in the real-estate sector. Economic factors such as wage growth outpacing inflation, falling mortgage rates, and easier finance conditions are enticing investors and supporting this cautious optimism in the housing market.
