UK house price growth softened in August as affordability constraints and tax uncertainty continued to weigh on the property market, according to the latest Nationwide figures.
Annual growth slowed to 2.1%, down from 2.4% in July, while prices dipped 0.1% month on month after seasonal adjustments.
Robert Gardner, Nationwide’s Chief Economist, reckons the moderation was “understandable” given stretched affordability.
He says: “House prices are still high compared to household incomes, making raising a deposit challenging for prospective buyers, especially given the intense cost of living pressures in recent years.”
MORTGAGE HURDLE
Gardner says that mortgage costs remain a significant hurdle, with typical repayments for a first-time buyer now consuming around 35% of take-home pay, well above the long-run average of 30%.
“Affordability should continue to improve gradually if income growth continues to outpace house price growth,” he adds, pointing to the potential for further Bank of England rate cuts to support buyer demand.
HOUSING STOCK
The analysis comes amid wider scrutiny of the UK housing stock. Nationwide’s research shows that the average property has grown slightly larger over the past decade, rising from 95.3 sq m in 2013 to 96.2 sq m today.
Terraced houses saw the biggest increase, with average sizes up 3.6 per cent, while flats have become smaller, down 1.7 per cent to 60.3 sq m.
Owner-occupied homes remain the most spacious, averaging 112 sq m, compared with 76 sq m in the private rented sector and 65 sq m in social housing. Yet much of this space is underutilised: 87% of owner-occupied homes have at least one spare bedroom, while 53% are classified as “underoccupied” with two or more spare rooms.
PRIVATE RENTED SECTOR
In the private rented sector, only 16% of homes fall into this category. Comparisons with Europe show that English dwellings are marginally smaller than the EU average of 103 sq m. Homes in the Netherlands, Norway and Belgium are the most spacious, while those in Eastern Europe are among the smallest.
Tom Bill, head of UK residential research at Knight Frank, says prices have “drifted lower since March as the market digests higher rates of stamp duty and supply continues to outstrip demand”.
And he warns that “recent property tax speculation risks sending both sales and prices lower as buyers and sellers deal with pre-Budget uncertainty for the second year in a row”.
INDUSTRY REACTION
Iain McKenzie, Chief Executive of The Guild of Property Professionals, says: “While the Nationwide House Price Index indicates a slight softening in annual growth to 2.1% in August and a marginal 0.1% month-on-month dip, it’s crucial to look beyond these headline figures to the market’s underlying strength.
“We’ve witnessed a solid performance in 2025, buoyed by the Bank of England’s recent interest rate cuts, which are boosting sentiment and are set to further inject momentum into the property market.
“Transaction levels are a key and encouraging indicator. We’re observing a healthy recovery, with July 2025 showing a 4% increase year-on-year and a 1% rise from June.
“We are firmly on track to achieve 1.1 million transactions this year, a true testament to the market’s resilience. Furthermore, mortgage approvals in June were up 5.6% annually, aligning well with the five-year average and underscoring robust buyer confidence.
“The housing market is proving its adaptability and capacity to stand firm.”
“Despite a more muted economic outlook and persistent price sensitivity, the housing market is proving its adaptability and capacity to stand firm. It’s not merely recovering; it’s recalibrating and establishing a new equilibrium, presenting opportunities for both buyers and sellers.
“We anticipate that house price growth will remain moderated for the remainder of the year. Increased housing stock levels are fostering greater competition among sellers and empowering buyers with more negotiating leverage. Therefore, correctly pricing a property from the outset will be paramount in this price-sensitive environment.”
NO SURPRISES
Marc von Grundherr, Director of Benham and Reeves, says: “August’s marginal dip is no surprise, with the school holidays always proving disruptive for buyers and sellers.
“However, this is nothing more than a seasonal summer slump as our plans to move take a backseat in favour of holidays and longer days spent in the sun with family and friends.
“Now that September has arrived it brings with it a greater degree of normality where our day to day routines are concerned and so we should see momentum return quickly, with greater consistency in both market activity and house price growth.”
PROPERTY OVERHANG
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “We are not particularly surprised that prices have softened although agreed sales have held up well, supported by slowly improving affordability and recent reductions in base rate.
“However, with so much property still overhanging the market, many buyers are seizing the opportunity of negotiating hard whereas worried sellers often have no option but to agree revised terms in order for the transaction to proceed.
“Looking forward, we don’t see much change and certainly not much chance of a strong rebound in prices, given concerns about autumn tax rises, particularly for the property market.”
REBALANCED UPLIFT
Matt Thompson, head of sales at Chestertons, says: “Last month, buyers used the holidays to review their finances, refine their search criteria and to view homes they already shortlisted.
“The number of properties coming onto the market has decreased, however. Whilst there was a substantial increase in landlords selling up amid the Renters’ Rights Bill earlier this year, it was a momentary uplift that has now rebalanced.
“As a result, buyers will find it more challenging to secure a property within their budget and are advised to start their property search as early as possible.”
CHALLENGES AHEAD
Nathan Emerson, Chief Executive at Propertymark, says: “It is encouraging to see that house prices remain resilient at a time when the housing market has seen turbulence, very much influenced by the current economic backdrop.
“There are, however, many positive factors to reflect upon: we have witnessed a drop in the number of fall-throughs, a trend that demonstrates an uplift in the number of property transactions completed, and the number of overall listings reaching an all-time high.
“There are challenges ahead, however, such as increasing the supply of new sustainable homes, providing assistance to first-time buyers, and for lenders, ensuring that the latest drop in interest rates translates into more affordable mortgage products.”
MOVING MOTIVATION
Verona Frankish, Choef Executive of Yopa, says: “The market may have paused over the summer, but the annual picture remains one of growth and resilience.
“With the holiday season behind us, attention now turns to the final run up to Christmas, which is traditionally one of the busiest periods of the year and one of the hard deadlines many buyers and sellers set for their completion data.
“The added motivation of moving before the festive season, combined with improving mortgage affordability, should help drive a strong finish to the year for the housing market.”
SURPRISINGLY RESILIENT
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, says: “The summer market was surprisingly resilient given the continued caution demonstrated by buyers. Well-priced property continues to sell, and the gap between serious buyers and committed sellers has narrowed.
“Stock levels remain constrained in some areas, keeping competition strong for the best homes.
“Looking ahead to autumn, we expect buyers to remain price-sensitive. The market feels more balanced than it did in the spring as those who are motivated press ahead but we don’t anticipate a surge in supply so the shortage of good stock will likely persist.”
PRICES KEPT IN CHECK
Jason Tebb, President of OnTheMarket, says: “The usual pattern of a significantly quieter summer for the housing market as people head off on holiday didn’t really materialise with evidence of steady activity as focused buyers and sellers proceeded with their moves.
“Average house prices are being kept in check by an increase in stock, which is likely to be even more the case as properties launch onto the market this autumn. Depending on what they are buying and where, generally speaking buyers are finding themselves in a strong position and are using that to negotiate on price.
“While much uncertainty prevails in the wider economy, five interest rate cuts in the past year have done much to boost the market, sustaining activity and momentum.
“Some lenders continue to reduce rates and ease criteria, further improving affordability among borrowers struggling with higher living costs. Further reductions will be crucial to encouraging confidence, particularly amid speculation as to what the autumn Budget might bring.”
