Are UK House Prices Really Falling? Testing the Claims

Are UK House Prices Really Falling? Testing the Claims

Over the last few months I have been talking about a potential fall in house prices. The logic behind this is simple – quantatitive easing and cheap money boosted the supply of funds to buy houses, while the Government restricted new house building. Both of these kept prices high. Both of these are coming to an end.

Over the past few weeks, two very different newspapers have arrived at what looks like the same conclusion. The New Statesman claims the housing market has “already crashed”. The Telegraph says house prices are falling across much of England and Wales. Normally when those two agree on anything, you assume a typo has occurred.

But strip away the politics and they are actually making a similar argument: that once you adjust for inflation, house prices are falling in real terms, even if the sticker price on Rightmove still looks stubbornly high.

So let’s test that claim properly.

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Step one: separate nominal from real prices

First, a basic but crucial distinction. There are two ways to talk about house prices:

• Nominal prices – the raw cash figures reported by Halifax, Nationwide and the Land Registry.
• Real prices – those same figures adjusted for inflation, i.e. what those pounds are actually worth.

Most headlines use nominal prices. But if inflation is running at 3–4% and house prices rise by only 0.3%, then in real terms homeowners are getting poorer, not richer.

This is exactly the mechanism the New Statesman is talking about: the pound has lost purchasing power faster than houses have gained value.

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Step two: what are nominal prices actually doing?

Late 2025 data tells a fairly dull story:

• Halifax reported annual house price growth of around 0.3%.
• Nationwide showed similarly anaemic growth.
• Month‑to‑month prices wobble up and down, but there is no dramatic collapse.

So in cash terms, no: the housing market has not “crashed”. Prices are broadly flat, not plunging.

That already puts a dent in the literal reading of both headlines.

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Step three: bring inflation into the picture

Now the bit everyone forgets. UK CPI inflation in late 2025 was around 3.2–3.5%.

If your house price goes up 0.3% while everything else goes up 3.5%, your asset has lost value in real terms.

Roughly speaking:

• Nominal house price growth: +0.3%
• Inflation: +3.3%
• Real change: –3.0%

That is not a crash, but it is a real‑terms fall.

This is the core of the New Statesman argument, and on this point it’s basically right.

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Step four: what about the Telegraph’s claim?

The Telegraph goes further, arguing that prices are now falling across much of England and Wales.

This depends heavily on:

• Which index you use
• Which region you look at
• Whether you compare month‑to‑month or year‑on‑year

In some regions, nominal prices have dipped. In others they are still inching up. So the paper is selectively right, but it’s hardly a nationwide collapse.

Where the Telegraph is strongest is again on real prices. Adjust for inflation and large parts of the country are indeed seeing a decline compared with previous peaks.

So the overlap between the two papers is real: both are effectively talking about inflation‑adjusted prices, even if they don’t always say so clearly.

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Step five: why this matters

Real prices matter more than nominal ones because:

• Wages are also eaten by inflation
• Mortgage rates are much higher than they were during the cheap‑money era
• Affordability is about income vs real prices, not yesterday’s sticker numbers

A flat nominal market during high inflation is not stability – it’s a slow erosion of wealth.

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Step six: what about mortgage interest?

There’s one more layer the headlines ignore. Most people don’t buy houses with cash. They buy them with debt.

That means the real cost of housing isn’t just the purchase price – it’s the price plus decades of interest payments.

During the zero-interest years after 2008, this barely mattered. Borrowing was artificially cheap, so rising house prices were partly offset by low monthly repayments.

That world is gone.

Typical mortgage rates in 2025 are around 5–6%, compared to sub‑2% a few years ago. On a £250,000 mortgage, that can mean hundreds of pounds more per month.

So even if:

• Nominal prices are flat
• Real prices are falling slightly

…the actual cost of owning a home has risen sharply because servicing the debt is much more expensive.

In other words, inflation isn’t the only hidden tax here. Higher interest rates are doing just as much damage.

When you combine:

• A weakening pound
• Stagnant nominal prices
• Rising borrowing costs

…you get a situation where homeowners feel poorer.

So if we really want to talk about a “crash”, it’s not in prices. It’s in affordability.

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Verdict

• Is the housing market “crashing”? No. That’s headline drama.
• Are nominal prices falling sharply? No. They’re basically flat.
• Are real prices falling once inflation is included? Yes, in many areas.

So the New Statesman is broadly correct on the economics, if a bit theatrical with the language. The Telegraph is directionally right but overgeneralises regional dips into a national story.

The truth, as usual, is less exciting than the headlines: UK house prices are stagnating in cash terms and falling quietly in real ones.

Falls in house prices are bad news for Governments – incumbent administrations lose elections if house prices are falling, and win them when house prices are rising. Right now wages are rising faster than inflation, house prices falling in real terms, which means that bit by bit affordability is increasing. That could be very good news for a Labour Government which is short of good news stories.

This of course doesn’t mean that house prices aren’t in course for a dip this year, just that reality doesn’t match the headlines.

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If there is a moral here, it’s that whenever someone claims the housing market has “crashed”, the first question should always be: in what terms?

https://www.newstatesman.com/politics/uk-politics/2026/01/the-housing-market-has-already-crashed