UK Housing Market Forecast for 2025-2026

Introduction

The UK housing market continues to face significant challenges in 2025. This analysis examines current trends and provides a forecast for the next 12 months.

Current Market Conditions

Housing prices have increased by 6.8% year-over-year, with the average home now costing £295,000 nationwide. London prices have seen an even steeper climb at 8.3%.

Supply and Demand Gap

New housing starts have improved to 205,000 annually, but still fall short of the estimated 250,000 units needed to meet demand.

Interest Rate Impact

With Bank of England rates at 4.25%, mortgage affordability remains a significant hurdle for first-time buyers.

Regional Disparities

While London and the South East face the most severe affordability challenges, regional cities like Manchester and Birmingham are now seeing similar pressures.

Forecast

We predict continued price growth of 4-6% over the next 12 months, with potential moderation if supply improvements can be maintained.