Annual growth slows to 2.7% in May but analysts point to stabilising demand and falling rates as reasons for cautious optimism
House prices in the UK continued to rise in the 12 months to May, reaching an average of £271,000 and increasing by 2.7%, according to the latest government data.
The annual growth rate fell from 3.9% in April, but analysts caution against reading the deceleration as a sign of weakness. The drop reflects a base effect: a modest 0.1% monthly price rise in May 2026 compared with a large 1.8% rise in May 2025, itself the product of buyer activity brought forward ahead of Stamp Duty Land Tax changes in England and Northern Ireland on 1 April 2025.
Private rent and house price annual inflation, UK
January 2016 to June 2026
Source: Price Index of Private Rents (PIPR) and UK House Price Index (HPI) from the Office for National Statistics
Price growth was broadly sustained across the UK's constituent nations. Wales recorded a 4.2% annual rise to £215,000, accelerating from 3.5% in April. Scotland saw prices climb 4.4% to £196,000, up from 3.2% the prior month. Northern Ireland, where the most recent data covers the first quarter of 2026, posted the strongest annual growth of any nation at 7.4%, with average prices reaching £198,000.
England's average price reached £292,000, a 2.3% annual increase, easing from 4.0% in April — again primarily a base effect rather than a market reversal.
Within England, the North East led on regional price inflation at 5.9% annually, though down from 9.7% in April. London remained the outlier, recording a 3.7% annual price fall — the ninth consecutive month of decline — driven predominantly by Inner London, where prices dropped 5.9%. Westminster and Tower Hamlets saw some of the largest falls. Outer London fared better, with a more modest 0.3% annual decline.
Industry figures pointed to the broader picture of resilience. "House prices are continuing to feel the effects of events outside of the market itself," said Chris Storey (pictured right), chief commercial officer at Atom bank. "The conflict in Iran, and the resulting impact on interest rate forecasts, has understandably led some potential buyers to pause their plans, and that is feeding through into the modest growth we are seeing currently. With the ceasefire failing, that uncertainty is likely to carry on.
"Despite these challenges, recent analysis from the Royal Institution of Chartered Surveyors (RICS) suggests the market is stabilising, with some improvements seen on new buyer enquiries and agreed sales. Mortgages are becoming far more competitive too, with Moneyfacts reporting the biggest fall in average rates in two years between June and July.
"The new Prime Minister, Andy Burnham has promised a dramatic improvement in the number of council houses built across the country, but he will also need to oversee an improvement in the number of private developments if we are to ensure home ownership becomes more affordable and achievable."
Rents continue to rise
In the lettings market, the average UK monthly private rent rose 3.3% to £1,388 in the 12 months to June, unchanged from the rate recorded in May.
England saw rents reach £1,446, up 3.4%, while Wales recorded a 4.9% increase to £843. Scotland's growth was more subdued at 1.3%, with average rents of £1,012. Northern Ireland's most recent data, to April 2026, showed rents up 2.9% to £877.
Within England, rent inflation was sharpest in the North East at 6.3% and softest in London at 2.2%.
"These rental figures reinforce what we've been seeing in other market data, including Rightmove," said Alex Upton (pictured right), managing director of specialist mortgages and bridging finance at Hampshire Trust Bank.
"Average asking rents remain at record highs, but the pace of growth is very different to what we saw over the last couple of years. That's creating a more balanced market, which tends to suit landlords taking a longer-term view rather than relying on rapid rental inflation.
Upton said the Renters' Rights Act was continuing to influence how landlords approach their portfolios, with smaller landlords weighing their options while more professional investors seek opportunities to strengthen their holdings.
"Delivering a sufficient supply of rental homes needs to remain a priority if the market is to stay accessible for renters while continuing to attract long-term investment," she added.
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