UK Housing Market Trends: What’s Happening Now – and the Forecast for 2026 and Beyond

UK Housing Market Trends: What’s Happening Now – and the Forecast for 2026 and Beyond

Introduction: A Resilient but Uncertain Market

The UK housing market in 2025 has been characterised by modest growth, persistent affordability challenges, and an unusually high dose of political and economic uncertainty. While early-year predictions warned of stagnation or decline, the market has instead shown quiet resilience. Prices have inched upward in most regions, although not dramatically, and the pace has varied significantly depending on location, price bracket and buyer type.

Official figures from the ONS and UK House Price Index show average UK house prices hovering around £270 – £273k in late 2025, reflecting low single-digit annual growth. By contrast, mortgage-based indices such as Halifax, which often skew toward higher-value transactions, report averages closer to £299k. These differences are normal, but they highlight the importance of looking at trends rather than single headline numbers.

With 2025 nearly behind us, the question now dominating the market is: what happens to UK house prices in 2026 and beyond?

This article breaks down current trends, explains what’s driving them, and provides a balanced, evidence-based forecast for the coming years.

UK Housing Market in 2025: Key Trends

1. Moderate National Price Growth

Across most major datasets, the UK has seen modest positive price growth in 2025. The majority of indices point to annual increases of 1 – 3%, far from the boom periods of the early 2020s but also avoiding the deep corrections some analysts once feared.

Demand has been held back by elevated borrowing costs, but not enough to trigger a widespread downturn. Instead, the market has found the middle ground to be steady, if unspectacular.

2. Sharp Regional Divergence

One of the most notable dynamics of 2025 has been the widening gulf between regions:

• Northern Ireland and Scotland have recorded some of the strongest annual increases, helped by more affordable prices and tight supply.
• London and the Southeast have experienced flat or slightly negative movement, particularly for homes above £500k. High running costs, tax fears and affordability ceilings have capped demand.
• High-value transactions (particularly £2m+) have softened noticeably amid rumours of potential new property taxes.

In simple terms: the further from London you go, the stronger the relative price performance tends to be.

3. Drag from mortgage rates but optimism on future cuts

Although mortgage rates have come down from their 2023 highs, they remain significantly above the ultra-low rates buyers were accustomed to. This continues to limit affordability, especially for first-time buyers.

However, financial markets and economist polls widely expect gradual Bank Rate cuts, opening the door to further mortgage easing in 2026.

This expectation has provided a degree of support to buyer sentiment, preventing deeper market cooling.

4. Policy uncertainty holding buyers back

Perhaps the most under-reported factor in 2025 has been the policy paralysis created by rumours of:

• Stamp duty reform
• New wealth or property taxes
• Changes to investment relief
• Adjustments to council tax bands or capital gains structures

Uncertainty ahead of the Autumn Budget saw many wealthier buyers pause, impacting agreed sales particularly in higher price brackets. Rightmove and other industry platforms highlighted declines in sales volumes above £500k that correlate directly with policy speculation.

This “wait-and-see” mindset is likely temporary – but it has clearly influenced 2025’s price performance.

Why the Market Stayed Resilient in 2025

Despite these headwinds, the market avoided significant decline for three key reasons:

1. Structural undersupply

Decades of underbuilding have left the UK short of homes, and the supply shortage continues to support prices. Planning reform may slowly alleviate this, but meaningful change will take years. The OBR notes high uncertainty over how quickly planned reforms will translate into actual new homes delivered.

2. Strong labour market fundamentals

Employment levels remain historically high, and wage growth, though slowing, has helped offset some affordability pressure.

3. Locked-in homeowners

Millions of homeowners are insulated from rate volatility through fixed-rate mortgages, limiting forced sales and preventing excess supply from hitting the market.

Forecast for 2026: What Most Analysts Expect…

Base Case and most likely scenario: Slow but Positive Growth

The consensus among economists, estate agents and market commentators suggests that 2026 will see low single-digit price growth, broadly in the range of 1 – 4%.

This would represent a continuation of the stable but subdued conditions of 2025, with slight strengthening as mortgage rates gradually fall.

Growth is likely to be:

• Stronger in northern regions, Wales, Scotland and Northern Ireland.
• Muted or negative in London and the Southeast, especially top-end markets exposed to tax risk.

Many experts describe 2026 as a “transition year”: stabilisation first, recovery later.

Optimistic Scenario: Faster Mortgage Rate Falls

If Bank Rate reductions happen sooner or more aggressively than forecast, housing demand could rise more sharply. Under this scenario, 2026 price growth could realistically reach 3 – 6% nationwide, with some regions outperforming this. Savills has modelled meaningful upside in its multi-year scenarios should macro conditions improve in line with this path.

Downside Scenario: Inflation or New Taxes Hit Confidence

The main risks to 2026 are:

• Persistent inflation preventing rate cuts
• A sharp economic slowdown
• Introduction of new taxes targeting property wealth
• Unexpected supply increases (less likely in the short term)

In this case, prices could flatten or fall slightly, particularly at the higher end. Industry data already shows softer performance in those segments.

Outlook for 2027–2030: The Medium-Term Picture

Looking further ahead, most major forecasting bodies expect a more meaningful recovery:

• Mortgage rates should settle at more manageable levels.
• Pent-up demand from 2023–2025 is likely to re-enter the market.
• Supply constraints will remain supportive of prices.
• Real-terms wage growth could improve affordability.

Savills and others project notable cumulative gains over the next five years under their base-case models, though precise timing varies. The overarching view: the UK housing market’s long-term demand fundamentals remain strong, even if year-to-year movements are modest.

What This Means for Buyers, Sellers and Investors

For Buyers

If you’re buying for the long term, timing the bottom of the market is less important than securing a mortgage you can afford. Expect steady rather than dramatic price changes in 2026.

For Sellers

Accurate pricing is vital. Over-pricing will lead to longer listing times in slower regions, especially London and the Southeast. Presentation and realistic expectations matter more than ever.

For Investors and Landlords

Rental demand remains strong, but tax and regulatory policy is the biggest risk. Focus on yield, not short-term capital gains.

Conclusion: A Market in Balance, Waiting for Clarity

The UK housing market in 2025 has walked a tightrope between economic challenges and structural resilience. Prices have held firm but not surged, and regional divergence is wider than at any point in the last decade.

Looking ahead to 2026, a gentle upward trend is the most likely path but the pace will depend heavily on mortgage rate movements and the government’s next steps on property taxation.

Beyond 2026, the medium-term outlook is more optimistic. With demand consistently outstripping supply and the likelihood of rate normalisation, the foundations for recovery are already in place.