The UK housing market in 2025 came to a subdued end, mainly shaped by the economic uncertainty around the Autumn budget and increasing mortgage interest rates. The good news is that the market is expected to show signs of recovery in 2026. While it is unlikely to bounce back to new heights, market experts predict a more balanced year.
New seller asking prices are forecast to rise by around two per cent by the end of 2026, which will renew confidence among buyers and sellers. In this article, we take a look at other predictions for the housing market in 2026.
A more balanced market outlook
It is anticipated that after several years of uncertainty, conditions will gradually improve. Mortgage rates seem to be coming down, with them hovering around the high three per cent to low four per cent at the start of the year. Homes are expected to become more affordable, but, as always, this will vary by location in the UK.
Areas with higher house and rental prices, such as London and the South of England, may be affected by recent and upcoming tax changes. These regions are still adjusting to the stamp duty changes introduced in April 2025 and are more exposed to future tax measures affecting higher-value homes.
While lower-priced areas, such as Scotland, Wales and Northern England, can expect to see more movement and average prices rising by around three per cent.
The Autumn Budget and market behaviour
The Autumn budget played a major role in shaping the housing market at the end of 2025. Many buyers and sellers paused their plans until it was clear what was changing and how those changes would impact them. Following the Autumn budget, it’s forecast that many buyers and sellers will resume their plans in early 2026.
Future tax changes are also expected to affect the housing market this year. Two of the biggest tax changes coming into force in the next few years are the mansion tax on homes worth more than £2 million, which will be introduced in April 2028 and the two per cent increase in income tax on rental income from 2027.
While the mansion tax is anticipated to dampen activity at the top end of the market, it’s not thought to bring it to a standstill in 2026.
Positive sentiment for first-time buyers
The last few years have been difficult for first-time buyers, but market experts predict a more favourable year in 2026. Firstly, there is likely to be a larger selection of homes in this market, giving them more negotiating power.
In addition, mortgage rates, which have made it challenging for first-time buyers, are slowly declining, making mortgages more affordable.
Looking to buy or sell a house in 2026?
If you are looking to buy or sell a house in the Coventry and Warwickshire areas, we’re here to help. At Shortland Horne, our team of experts have been helping people just like you since 1995 to find their dream home or take the next step on the property ladder.
If you would like to discuss your requirements or find out how we can help you in 2026, get in touch with a friendly member of our team today.