Recent figures suggest that property prices and rents appear to be moderating across the UK. In this article, IF Senior Researcher Conor Nakkan unpacks these trends and considers whether they represent good news for younger generations.
Are property prices and rents falling?
Property prices in some of the capital’s most desirable postcodes appear to be in freefall. According to the Office for National Statistics, average prices in the borough of Westminster fell by 15.5% in the year to November 2025. Prices in Kensington and Chelsea are down 16.3% over the same period. These are the largest annual declines since the global financial crisis.
Such figures might generate interesting headlines. But they mean very little for the vast majority of people hoping to buy their first home. The average property still costs around £866,000 in Westminster and £1.2 million in Kensington and Chelsea. This remains well above the national average of £271,000.
Nonetheless, broader pressures in the housing and rental markets also seem to be easing. Across the UK, annual private rent inflation has fallen from a peak of just over 9% in early 2024 to around 4% in late 2025. Annual house price inflation has dropped from 13.6% in mid-2022 to 2.5% in late 2025.
At first glance, this may sound like good news for those hoping to buy their first home. But it is important to be clear about what these figures actually show. They do not demonstrate that prices or rents are falling across most of the country. Rather, they show that prices and rents are still rising, just at a slower rate than before. Moreover, the large increases of recent years remain embedded in current prices.
Is affordability improving?
For first-time buyers, what matters most is not simply whether house prices are rising or falling, but how they compare to their wages. This is what the housing affordability ratio captures. It measures the ratio of the median house price to median annual earnings. The higher the ratio, the less affordable housing is for a typical buyer.
As we can see, affordability deteriorated significantly between 2002 and 2021. Across England and Wales, the ratio rose from 5.05 in 2002 to 8.94 in 2021. In London, it climbed from 6.9 to 13.6 over the same period. Even in regions where housing is traditionally cheaper, the trend was similar. In the North West, the ratio increased from 3.5 to 6.7.
Since 2021, there has been some improvement. By 2024, the ratio had fallen to 7.5 across England and Wales, 11.7 in London, and 5.8 in the North West. However, these trends need to be kept in perspective. Despite the recent declines, housing in every region remains significantly less affordable than it was in the early 2000s. In other words, the modest improvement of the past few years has not reversed the substantial deterioration that occurred over the previous two decades.
Housing inequality
The intergenerational consequences of housing unaffordability are clear when we look at changes in homeownership by age over the past two decades. As the chart below shows, since 2004–05 homeownership rates have fallen for every age group except those aged 65 and over.
Over this period, the share of homeowners aged 65 and over increased by 7 percentage points, rising from 72% in 2004–05 to 79% in 2024–25. By contrast, the largest declines were seen among 35–44-year-olds and 16–24-year-olds, whose homeownership rates fell by 15 and 17 percentage points respectively. Among 25–34-year-olds, the rate declined by 15 percentage points between 2004–05 and 2021–22. In the years since, it has increased by around 7 percentage points.
So, is the housing crisis getting better or worse for younger generations?
On the one hand, some of the recent trends are heading in the right direction. Increases in property prices and rents have slowed. The housing affordability ratio is declining from its recent peak. And homeownership rates among those aged 25-34 have risen over the last few years.
But there are still reasons for concern. For one thing, we are still not building nearly enough homes to meet demand. This shortfall is particularly acute in London. The capital has been set a target of building 88,000 new homes each year over the next decade. Yet, as the Financial Times recently reported, construction started on just 5,891 properties last year. That is 94% below the target.
Moreover, we also continue to use our existing housing stock inefficiently. Around 40% of homes are under-occupied, the majority of which are owned by older households. Far more could be done to encourage downsizing. Freeing up larger properties would help reduce under-occupation and ease pressures faced by younger workers and families.
Taken together, the data point to limited progress rather than a fundamental shift. The pace of deterioration may have slowed, but housing remains far less affordable than it was two decades ago. Without sustained increases in supply and more efficient use of existing homes, younger generations will continue to face significant barriers to homeownership.
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Photo by João Rodrigues on Unsplash.