UK House Prices Show Sign of Recovery in Early 2026

House prices in the UK have shown a slight improvement, with an average increase of one per cent recorded in the twelve months leading up to the end of January 2026. This rise surpasses economists’ forecasts of a 0.7 per cent year-on-year increase, according to data released by Nationwide, the UK’s leading building society.

The monthly increase, while viewed as a less reliable indicator of price trends, rose by 0.3 per cent last month, reversing only a fraction of the decline seen in December when prices fell by 0.4 per cent. Analysts have noted a slowdown in the housing market throughout the previous autumn and winter, primarily driven by uncertainties related to potential property tax reforms.

Many prospective buyers postponed their decisions during this period, which typically sees diminished activity in the housing market due to the seasonal trends associated with the holiday season. Concerns regarding the impending budget announcements contributed to this cautious approach among buyers.

Despite the recent modest gains, experts remain divided about the future trajectory of the housing market. Some analysts, such as Alex Kerr from Capital Economics, have expressed optimism about the longer-term outlook. The easing of mortgage rates, along with more lenient lending criteria from banks and anticipated wage growth, may indicate a gradual recovery in housing market activity.

Nationwide’s chief economist Robert Gardner echoed these sentiments, suggesting that with affordability improving, the market may experience a more robust rebound in the upcoming quarters. The data indicates that it is currently easier to enter the housing market than at any point in the last decade.

The affordability of first-time buyer properties has significantly improved. The typical house price for first-time buyers now equates to 4.7 times the average annual salary, down from nearly six times during the post-lockdown surge in demand. This figure also falls below the 20-year average of 4.9 times.

As indications of a more sustainable housing market emerge, approximately 55 per cent of all transactions in the past year involved first-time buyers, marking the highest proportion since records began in 2005. A notable portion of these buyers have received assistance in raising deposits, either through gifts from family or inheritances.

Variations in the affordability landscape persist across the UK; in Scotland and the northeast of England, first-time buyer house prices are under three times the average salary, whereas the southeast and southwest see figures exceeding five times. In London, the ratio stands above seven, although it has steadily decreased over the past two years.