Housing Market Predictions 2026
No one truly knows what will happen in the housing market – predictions are famously unreliable. A single financial or political shock can change everything overnight. Still, with 2026 fast approaching, I’m stepping into tricky territory to share where we think the housing market may be heading.
Interest rates
Interest rates will probably be the largest factor in deciding whether the housing market gathers strength during the year. Most analysts anticipate perhaps one small rate cut this month, December and then perhaps two more in 2026.
That would take the Bank of England’s base rate down to 3.25% or 3.5%. This is widely regarded as the lowest it will be for the foreseeable future. We have well and truly left the ultra-low-interest rate days seen some years ago. However, two or three small drops in the next months will help affordability for the 48% of existing homeowners with a mortgage, as well as first-time buyers.
House prices
We sometimes get carried away with house prices, which are expressed as ‘averages’ and usually at a national level. The reality is that the best estate agents will know the distinct characteristics of local markets. Each neighbourhood or sometimes even each street will have varying dynamics that determine house prices.
Even so, estate agencies with respected research departments have suggested average UK house prices will rise a modest 2% in 2026. Prices may rise more in the north of England, Scotland and Wales. Perhaps slightly less in southern England and London.
The 2026 rental market
Regular readers will know the story here. For several years, demand has outstripped supply. That is likely to continue in 2026. There may be a small but important reduction in rental stock during the year. This is because more landlords sell-up when they find that complying with the new Renters Rights Act costs more than they anticipated.
Like homes for sale, rents vary hugely according to the size and location of the property. However, the Royal Institution of Chartered Surveyors (RICS) has suggested that, on average UK rents could rise another 5% next year. That means yet more bad news for tenants.
More new homes in 2026
The government has pinned a lot of its credibility on hitting the target of 1.5 million new homes by mid-2029. However, early indicators are that it will miss that goal. Based on the fact that between July 2024 and November 2025, there were only 275,600 new homes built, around 18.4% of 1.5 million, it’s easy to see why.
In 2026, more newly built homes are likely to come on the market. However, house builders are warning that they will cost more to buy. This is because the government-imposed energy efficiency and building safety standards add to the build cost. Consequently, they will pass these costs on to the homebuyer.
New laws
The big change is the Renters’ Rights Act. It represents real progress for private tenants with the outlawing of ‘no fault’ evictions, some limits on rent rises, and the arrival of open-ended tenancies instead of six-month ones. Moreover, it will be much easier to keep pets.
Most of these measures come into effect on May 1st, while others arrive later. These include a register of landlords, the creation of a Rental Ombudsman to arbitrate in disputes, and ultimately a Decent Homes Standard setting the minimum specification for a rental property.
The possible downside is that some landlords may be unable or unwilling to pay for such improvements. This is especially true as by 2028 they will have to meet stricter Minimum Energy Efficiency Standards (MEES).
In 2026, there may also be a visitor tax introduced on properties or even just rooms let on Airbnb or similar ‘short lets’ online platforms. Just before the Budget, the government announced that local councils and mayors would decide whether to levy this per-night tax, and how much it should be. The expectation is that it will be no more than 5% of the cost of the accommodation, possibly less.
The so-called ‘mansion tax’, actually a council tax surcharge, won’t come into effect until 2028. However, its impact might be felt next year. To prepare for 2028, these more expensive homes (mostly in London and southeast England) will have to be formally valued over the next two years. I predict disputes over the values of properties at the ‘thresholds’ of £2m, where the tax begins, and then at £5m, where it increases.
A resilient market
These may be famous last words, but after the economic uncertainty of 2025, it seems to me that the housing market has readied itself for 2026.
House price indices show static or gently rising prices. The total number of sales looks likely to surpass the 2024 level. And we know where we stand with taxes, for good or for bad!
I anticipate a decent start to 2026. This is because buyers and sellers who sat on their hands leading up to the Budget will be ready to go. Most industry colleagues expect the ‘Boxing Day Bounce’ as people making plans over the festive market hit the agents’ websites and the portals to search for a new home.
For consumers, the advice remains to consult quality local agents for the best advice. Additionally, use Move iQ’s guides and keep abreast of what the market is doing at all levels.
Of course, as always, none of us has a crystal ball to predict exactly what 2026 will bring. However, we’ll continue with reports and insights in 2026. To be the first to know, subscribe to the newsletter below.
Last Updated: December 19th, 2025
