The Nationwide has warned that Rachel Reeves’ tax rises announced in last November’s Budget will lead to higher rents.

The building society made the claim as its latest house price index reported an unexpected fall.

Chief economist Robert Gardner comments: “The changes to property taxes announced in the Budget are unlikely to have a significant impact on the market. The high value council tax surcharge is not being introduced until April 2028 and will apply to less than 1% of properties in England and around 3% in London. 

“The increase in taxes on income from properties may dampen buy-to-let activity further and hold down the supply of new rental properties coming onto the market, which could, in turn, maintain some upward pressure on private rental growth.”

Nationwide says UK house prices fell in December compared to November, decelerating the rate of annual growth to the lowest in 18 months. Prices fell 0.4% month-on-month as 2025 came to an end, taking year-on-year growth slowed from 1.8% in November to 0.6% in December – the lowest since April 2024.

The building society says part of the reason for the fall is that a year ago – in December 2024 – house price growth was unusually high at 4.7%. 

Gardner adds: “Despite the softer end to the year, the word that best describes the housing market in 2025 overall is ‘resilient’. Even though consumer sentiment was relatively subdued, with households reluctant to spend and mortgage rates around three times their post pandemic lows, mortgage approvals remained near pre-Covid levels.”

Looking ahead to 2026 he says: “We expect housing market activity to strengthen a little further as affordability improves gradually (as it has been in recent quarters) via income growth outpacing house price growth and a further modest decline in interest rates. We expect annual house price growth to be broadly in the 2% to 4% range [in 2026].”