Coming off a turbulent 2025, the UK residential property market is entering 2026 with cautious optimism.

Last year brought slower growth, high borrowing costs, and policy shake-ups that reshaped buyer behavior. In this comprehensive outlook, we’ll first review 2025’s key statistics, surprises, and turning points, then dive into predictions for 2026,  from economic and interest rate expectations to regional vs. prime market trends, international buyer demand, the buy-to-let landscape, and housing supply challenges.

Whether you’re a high-net-worth individual eyeing prime London or a first-time buyer saving for your starter home, our analysis (informed by experts at Savills, Knight Frank, JLL, Nationwide, Halifax, Zoopla and more) offers data-driven insights to guide your decisions. Let’s explore what 2026 might hold for UK property and how to position yourself for the opportunities ahead.

2025 UK Housing Market in Review: A Year of Headwinds and Resilience

Slower Growth and Modest Price Gains:

2025 did not deliver the house price surge some expected. In fact, average UK house prices rose only around 1–2% in 2025, falling short of the 3%+ growth predicted a year priortheguardian.com. Nationwide’s index showed values up just 1.8% year-on-year by Novembertheguardian.com, and Zoopla reports a +1.1% annual house price increase (down from 1.9% in 2024)zoopla.co.uk. This meager growth, below inflation (3.2%), means prices effectively dipped in real termstheguardian.com. The market largely “treaded water” in the second half of 2025theguardian.com as buyer confidence waned amid economic uncertainty. Interestingly, despite fears of a downturn, outright price falls were mostly avoided – values held steady, with Nationwide recording only +0.5% growth in the first ten months of 2025introducertoday.co.uk.

In short, 2025 was a flat year for house prices, with limited upward pressure even as transaction volumes recovered (more on that below).

High Interest Rates and a Confidence Crunch:

The primary headwind was the high cost of borrowing. The Bank of England’s aggressive rate hikes in 2022–2024 left mortgage rates at 15-year highs entering 2025. Many homeowners rolling off old fixes faced payment shocks, and buyers’ affordability was stretched. Although policy easing had already started, the Bank moved more cautiously than markets expected, delaying a broadly anticipated pre-Christmas base rate cut until December 2025.theguardian.com. By then, average 5-year fixed mortgage rates had dipped below 4% for the first time since 2022 (with the best deals ~3.55%theguardian.com), offering slight relief.

But through most of 2025, borrowing costs remained elevated, dampening demand. Lenders grew cautious, and surveyors often down-valued properties in uncertain market conditions, something our Willow Private Finance blog on 2026 surveyor caution covers in detail (see Mortgage Valuations in 2026: Why Surveyors Are Still Cautious). The result was weak sentiment: the RICS surveys showed falling new buyer inquiries in late 2025savills.co.uk, and JLL noted that “uncertainty...pretty much killed the market in the second half of 2025”, leaving activity levels subduedtheguardian.com.

Policy Changes and Surprises:

On the policy front, 2025 was eventful. A temporary stamp duty land tax break expired in March 2025, which had pulled some sales forward and left a quieter springtheguardian.com.

Then, in April, an unexpected burst of US trade tariffs (from the re-elected Trump administration) rattled global markets and dented UK consumer confidencetheguardian.com.

But the biggest wildcard was domestic politics: a new government came into power and hinted at major property tax reforms. Rumors of tax changes ahead of the Autumn Budget caused many buyers and sellers to hit pause in Q4zoopla.co.uk.

Indeed, agreed sales in Oct–Nov 2025 plunged, the sharpest drop since the 2022 mini-budget crisis, exacerbating the usual winter slowdownzoopla.co.uk.

When the Budget finally arrived in November, it proved less dramatic than feared for the mainstream market. The headline measure was a “mansion tax” style council tax surcharge on £2m+ properties from 2028, with annual charges from £2,500 (at £2m value) up to £7,500 (at £5m+)savills.co.uk. This will primarily hit higher-end and second homes, and Savills expects only a modest impact on the wider prime marketsavills.co.uk.

For most buyers, direct tax changes were limited, restoring some certainty. In fact, once the Budget removed the cloud of speculation, agents reported a small pick-up in activity at year-endsavills.co.uk as pent-up decisions were unlocked.

Robust Sales Volume but a Buyer’s Market:

Despite soft price growth, housing transactions in 2025 rebounded strongly. An estimated 1.2 million homes were sold in 2025, a three-year high and roughly 9% more than 2024zoopla.co.ukzoopla.co.uk.

This recovery brought sales back in line with the 10-year pre-pandemic averagezoopla.co.uk, indicating that many people did move despite the challenges. Ample housing stock on the market greased the wheels: estate agents had the most homes for sale in seven years at one pointzoopla.co.uk, as rising mortgage costs prompted some owners to list and downsize, and new-build developers continued to market units actively.

With supply outpacing demand, conditions favored buyers. Indeed, RICS data showed a surplus of listings relative to house-hunters in late 2025, creating a “buyer’s market” that limited upward price pressureintroducertoday.co.uk. Sellers had to be realistic on pricing and often negotiated, new-build developers, for example, frequently offered incentives and discounts to secure sales in a slow marketknightfrank.co.uk. The good news is that people who could afford to buy benefited from less competition and more choice than during the frenzied pandemic boom. This dynamic, decent transaction levels but little price inflation, defined the 2025 market.

First-Time Buyers Dominate, Landlords Retreat:

A fundamental shift in buyer mix occurred in 2025. First-time buyers (FTBs) emerged as the powerhouse of the market, accounting for roughly one-third of all purchases (a record ~39% share) and nearly half of purchases in Londontheguardian.comzoopla.co.uk.

Hamptons data show 2025 saw the highest ever proportion of sales to first-timerstheguardian.com. Several factors fueled this: rents had spiked, making owning comparatively attractive; mortgage rates began easing for low-deposit loans; and crucially, regulatory changes made mortgages more accessible.

In 2025 regulators loosened mortgage affordability stress tests and allowed 35-year loan terms more broadly, enabling some buyers to borrow with 10-15% deposits and slightly higher income multiplestheguardian.com. “That’s knocking two or three years off the time needed to save a deposit,” noted Savills’ Emily Williamstheguardian.com.

Additionally, schemes to help FTBs and the self-employed onto the ladder were introducedtheguardian.com. All this meant many younger buyers pressed ahead despite economic worries, in fact, Halifax reported that the share of income needed for a typical first-time buyer mortgage fell to ~33% (from 38% in 2023) thanks to wage growth and slower house pricestheguardian.com.

While first-timers surged, other buyer groups pulled back. Existing homeowners making a move (“second steppers”) were only ~33% of saleszoopla.co.uk, as many stayed put to hang onto low-rate mortgages or avoided hefty stamp duty on upsizing.

And landlords were largely on the sidelines,   mortgaged buy-to-let investors made up a mere 7% of purchaseszoopla.co.uk.

In fact, more landlords were selling than buying. Years of tax hikes (e.g. reduced interest relief, extra 3% stamp duty) and 2025’s new challenges (higher mortgage rates, looming Renters’ Reform legislation) prompted an exodus. According to Savills, a 2% surcharge on rental income was introduced in the 2025 Budget (further eroding landlord profits)savills.co.uk, and the long-anticipated abolition of “Section 21” no-fault evictions was confirmed for May 2026savills.co.uk. Sensing tighter regulation and thinner margins ahead, many landlords opted to cash out. Their properties, often smaller, more affordable homes, were eagerly snapped up by first-time buyerstheguardian.com, a silver lining for new owner-occupiers.

The rental market itself was a story of soaring rents then cooling off: after double-digit rent growth in 2022–23, annual rent inflation slowed to about 2% by late 2025savills.co.uk as affordability hit a ceiling and tenant demand eased. Even so, rental supply remained constrained, and those landlords staying in the game could still command high rents amid an undersupply of quality lettingssavills.co.uk.

Regional Shifts – North vs South:

The property pendulum swung further north in 2025. London and the South East – traditionally the priciest regions – underperformed, while the North, Midlands and Scotland saw the strongest price gainssavills.co.uk.

For example, Nationwide noted that by late 2025 the North–South house price gap had narrowed to its smallest since 2013theguardian.com.

In some northern pockets, prices were still rising 5–8% annually (e.g. Sandwell in the West Midlands saw +7.9% YoY)savills.co.uk, whereas parts of the South East and East of England registered mild price falls (Eastbourne –4.5% YoY)savills.co.uk.

London’s housing market remained muted: values in many boroughs drifted down by a few percent, leaving London prices slightly lower year-on-year overall.

Prime Central London (PCL) was particularly soft, Knight Frank reported prices in PCL fell ~4% in 2025 as domestic buyer caution and higher transaction costs (stamp duty, proposed new taxes) curbed demandestateagenttoday.co.ukcountrylife.co.uk.

However, ultra-prime segments proved resilient to an extent, buoyed by a global elite still seeking trophy assets in London’s best postcodes.

One noteworthy trend was the strength of northern England and the Midlands, fueled by their relative affordability and local economic growth. Regional cities like Manchester, Birmingham, and Leeds saw steady demand, and even within regions, more affordable towns outperformed expensive commuter belts. The “race for space” COVID boom that had supercharged southern rural and coastal markets dissipated, bringing a more traditional north–south convergence. All told, 2025’s regional story was about the rest of the UK catching up to London,  a reversal of the 2010s when the capital massively outpaced other areas.

Resilience in the Face of Challenges:

Despite headwinds, be it 15-year-high interest rates, wariness about a new government’s policies, or cost-of-living pressures, the UK housing market showed resilience in 2025.

Prices didn’t crash; activity continued at healthy levels. Pent-up housing need (“the itch to move”) remained strong, supported by rising incomes and accumulated savingszoopla.co.ukzoopla.co.uk.

Many households adjusted expectations (choosing smaller homes or cheaper areas) rather than exiting the market entirely. Cash buyers (about 1 in 5 purchaseszoopla.co.uk) took advantage of quieter competition. And innovative financing helped some deals over the line, for example, bridging loans became a valuable tool for buyers and investors needing to act quickly or refinance creatively when mainstream lenders were slow. (See our guide on unlocking capital with bridging loans for how short-term finance filled funding gaps in 2025’s market.)

In summary, 2025 was a year of adjustment: the market recalibrated from the frenetic boom of 2021–22 to a more normal, sustainable pace. This sets the stage for 2026, which experts anticipate will bring gradual improvement as some pressures (like inflation and rates) finally ease. Let’s examine the forecast for the year ahead.

Economic and Interest Rate Outlook for 2026

All eyes are on the economy and interest rates as we enter 2026, since these fundamentals will heavily influence housing demand. The consensus view is that 2026 will see a modest economic slowdown but also the start of monetary easing, which should ultimately support the property market. According to Oxford Economics forecasts (cited by Savills), UK GDP growth is set to dip in 2026 and unemployment may tick up slightlysavills.co.uk.

After the robust post-pandemic job market, businesses face higher costs and have pared back hiring; a mild recession or very sluggish growth can’t be ruled out. This weaker economic backdrop is one reason housing experts remain cautious about price growth in the short termsavills.co.uk. People feel confident buying homes when their jobs and incomes seem secure, so a softer labor market in 2026 could temper housing activity.

On a brighter note, inflation has finally been tamed. Annual CPI fell to around 3.5% at end-2025 (from over 10% in 2022)savills.co.uk, and is expected to return to the 2% target by late 2026. With price stability in sight, the Bank of England has switched from raising rates to cutting them. It made a quarter-point rate cut in Dec 2025, and markets anticipate at least two more base rate cuts in 2026theguardian.com. While the exact timing is uncertain, most economists expect the BoE base rate (which peaked around 5.25%) to fall to perhaps ~4% by the end of 2026.

Mortgage lenders have already started pricing this in – several major banks dropped their fixed rates below 4% late last yeartheguardian.com, and competition is likely to further reduce mortgage costs in 2026. Knight Frank forecasts average mortgage rates will drift downward, giving a slight boost to borrowing capacity and buyer sentimentintroducertoday.co.ukintroducertoday.co.uk. However, rates are not plunging overnight; the BoE is moving gingerly. As Savills’ Lucian Cook cautions, “economists are less confident about the pace of rate cuts” with inflation still above targetintroducertoday.co.uk. So, we should expect incremental relief rather than a return to ultra-cheap credit. Even by late 2026, mortgage rates may still be higher than in the 2010s, meaning affordability remains stretched for many.

For existing homeowners, 2026’s rate trajectory brings opportunities and challenges. Over 1.6 million fixed-rate mortgages expired in 2025, forcing those borrowers to refinance at higher rates – a significant strain for someintroducertoday.co.uk. In 2026, slightly fewer fixes will end, but still hundreds of thousands will seek new deals. The good news is they might land a better rate by mid-2026 than if they refinanced last year. We anticipate a wave of remortgaging and refinancing as borrowers hop off expensive deals onto newly competitive offers. (For those weighing options, see our article on when not  to refinance a buy-to-let portfolio – timing and context matter)

Additionally, if base rate cuts come faster or deeper than expected, some homeowners may even consider refinancing early, incurring penalties, to lock in much lower long-term rates. Lenders are preparing creative retention offers to keep customers from switching as the rate landscape shifts.

Inflation vs. wages:

Importantly for housing, wage growth is now outpacing inflation, easing the affordability crunch. Pay growth cooled to 4–5% in late 2025savills.co.uk (from 7%+ earlier), but with inflation dropping below that, real incomes are finally rising again. Halifax notes that by end-2025 mortgage costs as a share of income for first-time buyers had fallen to the lowest since 2022theguardian.comtheguardian.com , a trend likely to continue in 2026. If wages keep growing ~4% and mortgage rates dip slightly, buying power will improve. That said, energy bills and taxes are still high, so buyers will remain price-sensitive.

Market sentiment:

The overall economic sentiment entering 2026 is one of cautious optimism. Businesses did feel a hit from a tough 2025 (PMI surveys showed the weakest confidence since 2022knightfrank.com), but with political clarity after the general election and some fiscal stability, a cloud of uncertainty has lifted.

Consumer confidence indexes are off their lows, though not exuberant. Importantly, housing demand isn’t disappearing: surveys find a large cohort of people still plan to move if they can, given life-stage needs (marriage, kids, etc.) and the “itch to move” remains alivezoopla.co.uk. We expect pent-up demand to gradually release in 2026 as interest rates fall. Indeed, Zoopla projects a stronger-than-usual surge of buyers in early 2026 now that the Autumn Budget is out of the wayzoopla.co.uk. The market may have a mini “New Year bounce” with those who stalled in late 2025 coming back to the table.

House price expectations:

What does this economic backdrop mean for house prices in 2026?

Forecasters are striking a balance between relief that the worst (in terms of rates) is over and realism about the recovery’s pace. Most major analysts predict UK house prices will rise only modestly in 2026, on the order of 1% to 3% on averagetheguardian.com.

For instance:

• Savills revised its 2026 house price forecast down to +2% (from an earlier 4%)introducertoday.co.uk
• Knight Frank expects around +3% growth
• Zoopla projects roughly +1.5%estateagenttoday.co.uk.

Similarly, Nationwide, Halifax, JLL, Hamptons, Rightmove and others are clustered in the low-single-digit rangetheguardian.com.

In other words, 2026 is likely to see a continuation of “steady, not spectacular” price growth. Property values should trend up a bit faster than 2025 (when growth was 1%), but a price boom is not on the cards while mortgage affordability is still an issue.

Higher interest rates for much of 2026 will constrain how much buyers can pay, especially with lenders stress-testing loans prudentlyintroducertoday.co.uk.

Additionally, the hangover of 2025’s soft market means some regions enter 2026 with slight price declines to claw back.

One point to note: by late 2026, if base rates have been cut significantly, we could see momentum building. Savills, for example, expects price growth to really strengthen from 2027 onward as economic conditions improve and housing supply shortages bite againintroducertoday.co.ukintroducertoday.co.uk.

But for 2026 itself, their outlook (and ours) is cautiously optimistic: a sluggish first half, potentially warming into a healthier second half. The wildcards include the global economy (any new shocks?), the speed of inflation’s fall, and government policy (more on that later). Barring surprises, 2026 should be a year of stabilization, paving the way for faster growth in subsequent years.

Mortgage market changes:

Buyers in 2026 will also benefit from some structural changes in the mortgage market.

As mentioned, regulators eased some lending rules (e.g. the scrapping of the 3% interest rate stress test buffer in 2024, and flexibility for longer loan terms). Moreover, there’s a push to innovate in lending: the financial regulator (FCA) launched plans to help first-time buyers and self-employed borrowers through new mortgage product designs or allowancestheguardian.com.

One example is 50-year term mortgages or “intergenerational” mortgages to spread costs.

Another is high-net-worth mortgages where private banks consider a client’s total wealth (investments, assets) rather than just salary, these became more popular as affluent borrowers sought to leverage stock portfolios or foreign income to qualify (our team has deep expertise in such bespoke high-net-worth mortgage solutions for complex cases).

All told, financing is expected to slowly get easier in 2026 compared to 2025’s crunch, which will underpin housing demand.

In summary, the economic and rate outlook for 2026 suggests a year of transition. The pain of high interest rates will start to alleviate, boosting confidence, but we aren’t back to “cheap money” yet, so price growth will likely remain muted. A slower economy could initially drag on housing, but as soon as interest rate cuts gain traction, real estate activity should pick up.

By year-end 2026, we anticipate a perceptible improvement in market sentiment, setting up a potentially stronger 2027. For buyers, 2026 may offer a window of relatively stable prices and improving mortgage deals, a far cry from the frenzied bidding wars of a few years ago, and an opportunity to negotiate wisely before any broader upturn resumes.

Prime vs. Regional Markets: A Two-Speed Property Landscape

Not all parts of the UK property market will move in unison in 2026.

We expect a two-speed landscape: the prime London market finding its footing after a soft patch, and the regional markets (especially the North and Midlands) continuing to show relative strength. Divergent local economies and buyer profiles will play a big role in performance this year.

Prime London and the South East:

2025 was tough for prime London real estate, but 2026 could mark a turning point, albeit a gentle one.

Most forecasts call for Prime Central London (PCL) prices to stabilize or see very low growth in 2026, after slipping in 2025estateagenttoday.co.uktheguardian.com.

Knight Frank, for instance, predicted flat prices in PCL for 2026theguardian.com. The Autumn Budget’s tax measures (like the upcoming mansion tax/council surcharge in 2028) caused some high-end buyers to hesitate, but now that those changes are defined (and relatively minor annually), we anticipate pent-up demand to re-emerge for prime properties.

London remains a global city and, as confidence returns, wealthy buyers, both domestic and international, are likely to see value in PCL after recent price dips. Indeed, foreign investors may view 2026 as a chance to snag a bargain: when the pound is weak or prices have fallen, dollar-based buyers gain significant purchasing power in Londonwillowprivatefinance.co.uk. (For example, U.S. buyers found in 2025 that a $10M budget went much further in London after sterling’s wobbleswillowprivatefinance.co.uk.) Should the pound soften with rate cuts, this currency play could quietly boost prime demand.

That said, the prime market’s recovery will likely be gradual. One reason is the ongoing high transaction costs, stamp duty on £5M+ purchases remains punitive (over 12%), which keeps a lid on speculative or discretionary trades.

Another factor is that ultra-high-net-worth UK buyers are evaluating the new government’s stance on wealth: any hints of further tax changes (capital gains, inheritance, etc.) could temper enthusiasm. But assuming no new surprises, the sheer scarcity of top-tier London homes and their long-term appeal should support prices. Savills expects prime London to slightly outperform mainstream UK over the next five years, but starting from a lower base in 2026introducertoday.co.uk. We might see, for instance, +2% in PCL and +3–4% in outer prime suburbs this year, versus +1–2% UK-wide.

Outside London, the broader South East and East may lag again. These regions have the highest average prices (and thus the most stretched affordability with higher interest rates). Many southern markets are still adjusting to the post-pandemic era, the “race for space” boom in country and coastal areas cooled sharply, and some of those areas saw small price declines in 2025.

In 2026, we expect flat to 2% growth in much of Southern England. Commuter belt towns might remain subdued until mortgage rates drop further or rail commuting fully normalizes. However, certain micro-markets will do well: cities like Bristol or Oxford, with strong local economies and limited housing supply, could inch up a bit more. And if London stabilizes, the South East generally benefits from a ripple effect over time.

The North, Midlands, and Beyond:

The UK’s regional markets, particularly North West, North East, Yorkshire, Midlands, and Scotland,  have been the standout performers and should continue to see above-average growth in 2026.

These areas still have room for catch-up after lagging London for much of the 2010s.

For instance, Northern England has enjoyed stronger price rises recently, and that trend is set to continue into 2026zoopla.co.uk. It’s possible we’ll see 3–4% growth in parts of the North West or Yorkshire, outpacing the national average.

There are a few reasons for this resilience: affordability (prices relative to local incomes are sensible, so interest rate impacts are less severe), inward investment (e.g. tech and media industries booming in Manchester, Leeds, etc.), and even migration (some southern retirees and remote workers relocating north, bringing equity).

Moreover, many northern cities and towns didn’t experience a big COVID bubble, so they don’t have a “hangover” of inflated prices to work off. For example, while a Cambridge or Bath might be seeing prices plateau, a Liverpool or Newcastle may still be on an upward trajectory. According to localized data, in mid-2025 some northern local authorities were topping the growth charts (e.g. Sandwell +7.9% YoY, parts of Scotland also strong)savills.co.uk.

We anticipate Scotland and Wales will also see modest gains around the 2–3% mark in 2026, again, helped by relative affordability and different market cycles (Scotland’s market slowed in early 2025 due to a spike in transaction taxes there, but activity is recovering now).

London vs. Regions, the gap and convergence:

One interesting development to watch is the further narrowing of the North-South divide in house prices.

As noted, the gap in average values is as small as it’s been in over a decadetheguardian.com.

If northern markets even slightly outperform again in 2026, we’ll see that convergence continue. For homeowners in the Midlands and North, this is good news, their properties are finally gaining relative value. For investors, some are rebalancing portfolios: a number of buy-to-let investors who sold out of, say, the South East are reinvesting in northern rentals where yields are higher and capital prospects solid.

However, history suggests London won’t stay quiet forever. The capital usually leads the next cycle’s upswing once incomes adjust and global buyers return. So 2026 could be the last year of this particular convergence phase. From 2027 onwards, a revitalized London might start outpacing the regions again, especially if financial sector jobs and international demand ramp up. But that’s beyond our current horizon, for now, 2026 belongs to the regions in terms of vibrancy.

Sub-markets within regions:

It’s worth noting that within any region or city, there will be micro-markets that beat or lag the averages.

In London, for example, family houses in suburban zones (Zones 3–6) actually held value better in 2025 than prime central flats, because more domestic families are looking for space and good schools. Those areas (think Wimbledon, Richmond, Hampstead) might see a bit more price growth in 2026 (maybe 2–3%) as people who postponed upsizing in 2025 try again.

Meanwhile, ultra-prime addresses (£10m+ homes) may depend on the global climate, they could either bounce back with a few big-ticket sales driving indices up, or remain flat if buyers remain in “wait-and-see” mode.

In regional cities, city-centre flats versus suburban homes may diverge. The work-from-home trend has permanently altered demand for city-centre apartments, especially those without special amenities. Some urban flats in second-tier cities might still struggle to gain value in 2026, whereas good family homes in commutable suburbs or attractive countryside will likely see competitive bidding. For instance, a 4-bed in a Yorkshire market town with good rail links might attract multiple offers, while a similar-priced new-build flat in central Leeds might languish unless priced keenly.

Investor interest regionally:

One factor potentially boosting certain regional markets is investor and developer activity.

With London yields so low, institutional investors have been funding Build-to-Rent (BTR) and single-family rental developments in regional hubs at an increasing rate (over £1bn invested in single-family rental between Q1–Q3 2025)knightfrank.co.uk.

This injection of capital is adding new high-quality rental supply in cities like Manchester, Birmingham, and Bristol, which can indirectly support local housing markets (renters have more options; developers get liquidity to reinvest). But it also means competition for development land in those areas is intense. Knight Frank’s land index showed urban brownfield land values were down 5% YoY in 2025 overallknightfrank.co.uk, reflecting cautious sentiment, but well-located sites in regions aligned with housing need still saw bidding warsknightfrank.co.uk.

For 2026, we expect major housebuilders to continue focusing on those high-demand regional locations, which will eventually bring more new homes (and perhaps moderate price growth) there, even as supply in southern England is constrained by planning issues.

Summary for Prime vs Regional:

To sum up, 2026 will likely extend the “multi-speed” pattern: relatively flat pricing in London and pricey southern enclaves, and better growth in the Midlands, North, and affordable pockets nationwide.

Prime London is searching for a floor, it may find it this year, but any rebound will be gentle at first. The rest of the country should see slow and steady appreciation. For homeowners and buyers, the takeaway is: your local market’s dynamics matter immensely. Don’t just follow national averages. If you’re a high-net-worth buyer eyeing London, 2026 could be a savvy entry point while prices are subdued (and we can help arrange the bespoke large mortgage financing such acquisitions often need). If you’re a homeowner in northern England, you might finally see some satisfying gains in your property value after years of patience.

And if you’re relocating, you’ll find much more house for your money outside the M25, a trend unlikely to reverse in the near term.

Demand from International Buyers: Global Interest in UK Property

International buyers have long been a key ingredient in the UK, and especially London, property market. Their influence waned during the pandemic and with recent tax changes, but 2026 could see a notable shift. Overall, we expect international demand to strengthen slightly in 2026, particularly for prime properties, though it will remain below peak levels of a decade ago. Different nationalities are behaving differently, so let’s break down the trends.

Americans and North American buyers, the rising force.

In recent years, buyers from the US (and Canada to a degree) have become increasingly prominent, and this trend should continue into 2026. In fact, Americans overtook the Chinese as the largest group of overseas buyers in Prime Central London in late 2024knightfrank.com, and they remained very active through 2025. London’s appeal to Americans includes cultural familiarity, English language, relative “value” (many U.S. coastal markets are pricier than London now on a $/sqft basis), and the weak pound boosting their budgetswillowprivatefinance.co.uk.

For Americans with substantial wealth, a flat in Mayfair or a house in Kensington is now seen almost as a strategic asset – a diversification of residence and an investment. We expect more transatlantic buying in 2026, aided by the strong U.S. dollar. Private banks are catering to this: it’s now common to see USD-denominated mortgages for American buyers or mortgage packages that integrate their U.S. investment portfolios as collateralwillowprivatefinance.co.ukwillowprivatefinance.co.uk. (See our dedicated article on financing for HNW Americans buying in London for details on these tailored solutions.) The upshot is that if sterling remains soft or UK prices look attractive, Americans will seize the opportunity. Don’t be surprised if come summer 2026, a few headline-grabbing purchases by American celebrities or entrepreneurs make the news

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Chinese, Hong Kong, and Asia-Pacific buyers, cautious but possible resurgence.

Chinese buyers were a driving force in London and new-build markets until a few years ago, but have lately pulled back. Strict capital controls in China, COVID travel restrictions (only lifted in late 2022), and geopolitical tensions all played a role.

In 2025, reports suggested ultra-wealthy Chinese adopted a “wait-and-see” approach and even shifted toward renting luxury London homes rather than buyingjingdaily.com.

Hong Kong buyers (a separate cohort, often using BNO visas) were more active in 2021–22 but also slowed in 2023–25. For 2026, this group is a wild card. On one hand, China’s economy has been slower, and its government is keeping a close eye on overseas asset purchases. On the other hand, if Chinese stocks and property remain weak, wealthy Chinese might look abroad for stable investments.

The UK is still seen as a safe haven with rule of law and, for Hong Kongers in particular, a welcoming second home. We might see a moderate uptick in Chinese interest if they sense London prices have bottomed out.

Developers certainly hope so, many new-build high rises in London and Manchester have units earmarked for Asia marketing.

We’ll also watch Indian and Middle Eastern buyers, who have been steady presences.

Indians have been some of the top foreign buyers by volume (especially for new-build apartments in zones 3–5), and Middle Eastern royalty and investors remain key players at the very top end (Knightsbridge penthouses, country estates, etc.). With oil prices high, Gulf-based investors have plenty of capital, they could diversify into UK real estate more in 2026, especially if they view the new government as business-friendly.

Europeans, making a quiet comeback.

Post-Brexit, EU buyers dropped off, but there are signs of recovery. The weak pound also benefits euro and franc buyers. We’ve seen more French and Italian families shopping in London for education reasons (schools/universities). 2026 might bring a few more Europeans back into UK property now that the dust of Brexit has settled and travel is normal again. They often focus on specific areas (e.g. French in South Kensington, Italians in Marylebone, etc.), bolstering those micro markets.

Overall share of overseas buyers:

It’s important to keep perspective – overseas buyers today make up a much smaller share of the total UK market than a decade ago. By one estimate, only ~1% of all property inquiries nationwide in early 2025 were from overseas, a record low proportionmortgagesoup.co.uk. Foreign buyer activity is heavily concentrated in central London and parts of London’s fringe (and a few other prime pockets like the Surrey estate belt or central Manchester for new-build flats). So while international demand can drive marginal price changes in those markets, it doesn’t directly affect the typical British homebuyer looking in, say, Birmingham or Leeds. However, indirect effects (like developers targeting overseas sales, or currency flows influencing investment volumes) do ripple through the industry.

Policy impact on international buyers:

The UK implemented a 2% stamp duty surcharge on overseas buyers in 2021, which means foreigners now pay up to 17% SDLT on a prime purchase (an eye-watering amount). This has certainly deterred some speculative investments. There is no indication the new government will remove this surcharge in 2026 (they would be hesitant to be seen favoring foreign investors over domestic buyers).

Visa-wise, the old “Golden Visa” route (Tier 1 Investor visa) remains closed, so ultra-rich investors cannot essentially buy residency as before.

Instead, schemes like the Global Talent Visa or special entrepreneur visas are what bring wealthy individuals here now, aside from those coming for work or education. We might see some incentives for overseas investment in specific sectors (maybe funding rental housing or infrastructure) but nothing announced yet that directly boosts home buying. One interesting development: developers and agents increasingly travel to overseas property fairs (in Dubai, Hong Kong, Singapore) to market new projects.

This will likely ramp up in 2026 if domestic demand is only lukewarm, they’ll try to fill the gap with international sales roadshows.

Outlook:

For 2026, we expect international buyer demand to add a tailwind especially to prime London and new-build city markets.

It won’t be a flood, but perhaps a rising tide. For sellers of high-end properties, this is welcome news, the broader pool of buyers should help liquidity.

For domestic buyers, more overseas interest could mean stiffer competition on certain properties (you might find yourself bidding against an expat or investor on that Central London flat). But for most regions and price points, Brits will still be mainly competing with fellow Brits.

From a financing perspective, international buyers often have unique needs – cross-border income, lack of UK credit history, foreign currency considerations. This is where specialist financing comes in. Private banks, for example, might offer multi-currency mortgages that let an international client borrow in USD or EUR for a UK purchasewillowprivatefinance.co.uk, or agree to higher LTVs in exchange for assets under management (like an American buyer who puts $5M in the bank’s investment funds to get a better rate on a £10M loanwillowprivatefinance.co.ukwillowprivatefinance.co.uk).

As a brokerage experienced in international cases, we anticipate helping more overseas clients in 2026 navigate these options – whether it’s a Middle Eastern client using an offshore company mortgage for a London buy-to-let, or a Hong Kong family using a bridging loan to secure a UK home quickly before moving here.

In summary, international buyers are cautiously re-engaging with UK property. Americans lead the charge, Chinese are a question mark, and others tick along. The UK’s political stability (post-election) and a relatively recovering economy could enhance the country’s appeal as a safe haven. If global markets remain volatile (as they were in 2025), we could even see a phenomenon where global capital flows into UK real estate for stability, especially given the UK’s transparent legal system and no restrictions on foreign ownership.

So, keep an eye on those foreign license plates at upscale estate agents, 2026 might see a few more of them.

Buy-to-Let and Rental Market Outlook for 2026

The buy-to-let (BTL) sector and the broader rental market are at an inflection point in 2026, shaped by years of regulatory squeeze and the recent interest rate surge. Last year saw many landlords selling up and renters facing sky-high rents. The question is: will 2026 bring relief or further challenges?

The likely scenario is a bit of both: rent growth should moderate (good news for tenants), but landlord profitability will remain tight, and rental supply could even constrict further due to new rules, potentially keeping the market tough for renters.

Landlords under pressure:

2025 was arguably one of the hardest years for buy-to-let landlords in recent memory. Mortgage costs soared, with many BTL fixes jumping from 2% to 5%+ upon remortgaging. This squeezed margins severely, especially for highly-leveraged investors. While interest rates will ease somewhat in 2026, they’ll still be relatively high historically. Many landlords coming off fixed rates this year will be refixing around 4–5%, which, although slightly better than 2025’s peaks, is still double what it was a few years ago. Unless they can raise rents significantly (which may not be feasible in the current climate), their profits remain pinched.

To compound this, the government has increased taxes on landlords yet again. As noted, the Autumn 2025 Budget added a 2% surcharge on property rental income for landlordssavills.co.uk.

Essentially, this is like an extra 2p on the tax rate for rental profits – further reducing net yield. Moreover, the phased-in corporation tax increase (to 25%) affects those with properties in company structures. All these changes erode returns, pushing more “Mom and Pop” landlords to question whether it’s worth continuing. We anticipate further consolidation in the BTL market in 2026: smaller landlords may exit, selling properties to either owner-occupiers or larger professional landlords. Indeed, Savills observes that landlord sales have already been elevated due to the succession of tax and regulatory changesknightfrank.com, and this trend has legs.

Renters’ Reform and Section 21:

The big change looming is the implementation of the Renters’ Reform Act (informally, Renters’ Rights Act). Government confirmed that from 1st May 2026, Section 21 “no-fault” evictions will be abolishedsavills.co.uk. This is a seismic shift in the private rental sector. Landlords will no longer be able to evict tenants without giving a concrete reason (like breach of contract). While great for tenant security, some landlords feel this tilts the power balance too far. If they fear being stuck with problematic tenants, a portion may decide to sell rather than continue renting under the new regime. How well this transition is managed will be critical for future rental supplysavills.co.uk.

The government promises to also expedite court processes for evictions under legitimate grounds (like anti-social behaviour or rent arrears), but landlords are skeptical until they see it in practice. Our view is: in the short term, the abolition of Section 21 will likely cause a slight further shrinkage of the rental sector, as a minority of landlords get cold feet and exit. However, those who remain or new entrants (such as build-to-rent operators) will adapt – using strong vetting, clear contracts, and adjusting to a more tenant-friendly landscape.

Rental supply and demand:

The UK’s rental market remains fundamentally undersupplied. Even if demand growth slows (for instance, if more renters manage to become first-time buyers in 2026 thanks to improved affordability), there is still a structural shortage of rental homes in many areas. Supply constraints are likely to continue, if not worsen, in 2026. One reason: the landlord exodus discussed. Another: new buy-to-let purchases are at very low levels (only 7% of sales in 2025 were to landlordszoopla.co.uk). That means few fresh rental properties coming on line. Additionally, some landlords converting to short-term rentals (like Airbnb) reduces supply for long-term tenants in certain cities, though new rules in cities like London might clamp down on this.

On the demand side, while some renters will leave to buy homes, there’s still growth from other sources – e.g. students and young professionals returning to cities post-Covid, and net migration which is near record highs (immigrants often rent initially). Thus, we don’t expect a collapse in rental demand; rather, it might level off slightly. In fact, RICS surveys in late 2025 noted tenant demand had started to dip a touchsavills.co.uk, possibly because sky-high rents have pushed some people to double up or stay with family longer. If rents stabilize, demand could bounce back. But if the economy wobbles and unemployment rises, some households might consolidate, tempering demand.

Rent price outlook:

After several years of sharp rises (2022 and 2023 saw double-digit % rental growth in many regions), 2025 already saw a significant slowdown to ~2% annual rental growthsavills.co.uk, and 2026 will likely continue with modest rent rises, roughly in line with wage growth (say 3–4%). Some forecasters even think rents will plateau in parts of London because tenants simply can’t pay more – any further rent hikes would spike void periods or result in tenants moving out of the city. Knight Frank has revised up its prime London rental growth forecast slightly (to ~3.5% in 2025 and 4% in 2026knightfrank.com) anticipating the supply pinch, but that’s prime; mainstream UK rents are expected to increase only modestly, if at all, in real termsknightfrank.com. The rapid rent increases of recent years are behind us, which is a relief for tenants.

However, a “slowdown” in growth still means rents are at record highs and not likely to come down. It’s more a case that rents might rise £10 instead of £50 a month this year.

Regional rental trends:

Similar to house prices, rental markets vary by region. London and Southeast rents skyrocketed post-pandemic and have probably hit an affordability ceiling, so we foresee minimal growth there in 2026. In contrast, some Northern and Midlands cities could see a bit more uplift as they’re starting from a lower base – e.g. if graduates flock to Manchester for jobs, rents there might creep up a few percent due to demand.

Another trend: the rental market for larger family homes in suburbia remains extremely tight. Many families who sold homes during the boom and decided to rent temporarily (or who relocated and rented first) are still in the rental market, and there’s a dearth of 3-4 bed family rentals with gardens. Those could still command higher rents in 2026 due to competition. Meanwhile, the city centre flat rental market might soften slightly as more build-to-rent units come on stream (adding supply) and some renters shift to buying. We’ve already seen in some cities like Birmingham that a wave of new high-rise rentals has kept rent growth in check.

Professionalization and refinancing:

Facing thinner margins, landlords will need to be savvy in 2026. Many are refinancing their portfolios to optimize interest costs – for instance, moving properties into limited company mortgages or onto longer-term fixed rates to ride out volatility.

We also observe a continued professionalization of the sector: the casual landlords are bowing out, while serious investors scale up with efficiency, sometimes using portfolio mortgages or bridging finance to restructure debts and acquire selectively. Some are diversifying to higher-yield segments like HMOs (houses in multiple occupation) or holiday lets, though both have their own regulatory tightening.

Build-to-Rent (BTR):

One positive development for renters is the ongoing growth of institutionally-backed Build-to-Rent. As mentioned earlier, big investors are funding thousands of new rental units, mostly in city centres. 2026 will see more BTR projects completing, offering tenants modern, professionally managed flats (often with amenities). While these typically target the mid to high end of the rental market, they do add options and can slightly reduce competition for older rental stock. The government is supportive of such investments as it keeps rental supply from collapsing despite private landlords leaving.

Over time, BTR could account for a larger share of rentals (it’s still <5% now), but in 2026 its impact will be localized to areas around those new developments.

Regulations and tenant quality:

The combination of higher costs and tougher rules means landlords in 2026 will be extremely focused on tenant quality and property management. Expect even more rigorous referencing, requests for guarantors, etc. Landlords will favor stability, a tenant who will stay 2-3 years and treat the property well under the new rights. Many will also invest in upgrades (energy efficiency, etc.) to ensure compliance with incoming standards (like EPC C requirements looming in a few years for rentals). That does mean rental properties on the whole may improve in quality, but those upgrade costs are another reason some landlords quit.

Outlook for investors:

Is buy-to-let still worth it in 2026?

For smaller investors, the maths is challenging. Average rental yields are around 4-5% gross, and with mortgage rates similar or higher, plus taxes, net yields can be very low or negative unless one bought years ago at lower prices.

We suspect new buy-to-let purchases will remain subdued until interest rates fall more significantly (perhaps by 2027).

However, cash-rich investors or those using creative financing might find opportunities, e.g. buying ex-landlord properties at a discount in areas with very strong rental demand, then holding for yield and long-term gain. Market veterans sometimes say the best time to buy is when others are fearful; by that logic, 2026 could present some attractive entry points in the BTL market for those with a long-term horizon and the ability to finance efficiently (possibly via offset mortgages, interest-only loans, or even short-term bridging loans to acquire and then refinance once rates are lower).

For tenants, the 2026 outlook is a mixed bag: rent increases should be much smaller than they’ve been, and new tenant protections will enhance security, but finding a home could remain difficult in popular locations due to fewer rentals and lots of competition. Our advice to renters is to start your search early, have your references and finances ready, and consider broader areas or slightly less prime locations to improve your odds. And keep an eye on the First Home schemes and mortgage deals, 2026 might be the year it becomes easier to step onto the ladder and escape the rent race, thanks to falling mortgage rates and those relaxed lending rules.

In conclusion, the private rental sector in 2026 is poised for a period of adjustment. Landlords who adapt will likely be in it for the long haul, running their portfolios more like businesses. Tenants may get a breather from relentless rent hikes, but not outright relief. If you’re a landlord feeling the pressure, talk to a specialist broker (like Willow Private Finance) about refinancing options or exit strategies – sometimes a smart refinance can improve your cash flow, or a bridging loan can facilitate selling one property to reduce debt on others. And if you’re considering entering the market fresh, make sure to factor in all the new rules and stress-test your investment at higher rates – it’s a different game now than it was five years ago.

The Bottom Line:

The UK residential property market in 2026 is poised for gentle recovery and adjustment, not a boom or bust. After the near-standstill of 2025, we expect gradually improving conditions: interest rates inching down, a bit more buyer confidence, and modest price growth, especially outside London.

Prime markets should stabilize, and first-time buyers will likely remain a driving force thanks to better affordability and policy support. Yet, challenges persist: housing supply won’t dramatically increase overnight, and landlords face a make-or-break year adapting to reforms and higher costs.

For homebuyers, 2026 offers an environment of relatively stable prices and increasing choice, with less competition than the frenzied days of 2021.

It could be an opportune moment to make your move before any larger uptick in prices resumes in later years. High-net-worth buyers might find prime opportunities in a calmer London market, the kind of climate where savvy negotiation and bespoke financing can secure a dream property at a reasonable price. Meanwhile, homeowners with mortgages should stay alert for chances to refinance at better rates as lenders roll out new deals this year.

At Willow Private Finance, we understand that whether you’re purchasing a £300k first home or a £3m investment property, the stakes are high and the landscape is evolving. Our role is to be your expert guide and advocate in this market.

As 2026 unfolds, personalized, data-informed advice will be more important than ever. Our team has its finger on the pulse of interest rate changes, lender criteria shifts, and niche opportunities (like bridging loans for quick purchases or private bank mortgages for complex incomes).

We pride ourselves on delivering the clarity and whole-of-market access that both everyday buyers and high-net-worth clients need.

Frequently Asked Questions (FAQ)

1. What are experts forecasting for UK house prices in 2026?
Most analysts predict modest house price growth in 2026, roughly in the +2% range nationally. This is a slight improvement on 2025’s ~1% growth but nowhere near boom levels. Essentially, prices are expected to rise just a little faster than inflation. Some regions (particularly the North of England and Scotland) may see slightly higher increases (3–4%), while London and the South might flatline or tick up only 1%. The consensus reflects lingering affordability constraints due to past interest rate hikes. That said, every locale is different, the best opportunities for capital growth may lie in affordable, in-demand areas outside the pricey South East. Overall, 2026 should be a year of gentle recovery for house prices, setting the stage for stronger growth from 2027 onwards as the economy and consumer confidence improve.

2. Will interest rates go down in 2026, and how will that affect mortgages?
Yes, the general expectation is that the Bank of England will cut base rates gradually through 2026 as inflation comes under control. We’ve already seen a rate cut in Dec 2025, and economists foresee perhaps two more quarter-point cuts during 2026. This could bring the base rate from its 5%+ highs down toward the mid-4% range by year-end. For mortgages, this is encouraging news: fixed rates have started to fall and could dip further. It’s realistic to expect average 5-year fixed mortgage rates in the 3.5%–4% range later in 2026 (down from 5% in mid-2025).

Some competitive deals might even breach 3% if banks are confident about continued rate drops. Lower interest rates mean improved affordability , monthly payments would consume less of a typical buyer’s income than last year. It also means refinancing opportunities: many who locked in higher-rate fixes in 2023–25 will look to remortgage for cheaper as soon as it’s viable. However, don’t expect ultra-low rates of 1–2% to return; the “new normal” for mortgages may be around 3–4% if inflation stays slightly above target. We advise homeowners to review their mortgage in mid-2026 – it could be an ideal window to secure a better fixed rate for peace of mind.

3. Is 2026 a good time to buy property in the UK, or should I wait?
For many, 2026 could be a smart time to buy. The market is relatively calm: prices aren’t running away, and in real terms houses are slightly cheaper than a year ago (since 2025’s price growth lagged inflation). With interest rates starting to ease, buying now means you might benefit from improving mortgage deals and lock in a home before any major uplift in prices resumes. Importantly, there’s more choice on the market,  2025 saw an increase in homes for sale, so buyers can be pickier and possibly negotiate better. First-time buyers especially have incentives: lenders are more flexible on criteria (lower deposit requirements, etc.), and schemes to help FTBs are expanding. If you’re financially ready and find a property you love, there’s little sense in waiting for large price drops that most experts don’t anticipate. However, it’s crucial to buy smart: focus on value, get a good survey, and secure a mortgage decision-in-principle early (rates can be booked ahead). One caveat: if your employment or personal situation is uncertain, or if you think you might move again very soon, renting a bit longer could be prudent. But for a stable buyer with a medium to long-term horizon, market conditions in 2026 are generally favorable for purchasing, it’s closer to a buyer’s market than we’ve seen in years, and you won’t be forced into frantic bidding wars like in the past boom.

4. What’s the outlook for the UK rental market in 2026 – will rents finally stop rising?
Renters could see some relief in 2026. The pace of rent increases is expected to slow markedly, and in some regions rents might plateau. In late 2025, annual rent growth had already cooled to about 2% (after hitting 10% a year earlier), and forecasts suggest mainstream rents will rise only around 3% or less in 2026, roughly matching wage growth. In real terms, that’s close to flat. A few factors are behind this: stretched affordability (renters simply can’t pay much more), a slight uptick in rental supply from Build-to-Rent schemes, and possibly a small exodus of tenants who managed to buy homes. Also, tenant-friendly reforms (like the end of Section 21 evictions in mid-2026) might encourage tenants to stay put longer, reducing churn and extreme demand spikes. However, don’t expect rents to drop significantly, the overall shortage of rental homes remains. Many landlords have left the market, and those remaining face higher costs, so they will try to keep rents as high as the market permits. London rents, which jumped enormously post-pandemic, might stagnate or even dip in some prime areas as people reach breaking point. But in affordable cities and university towns where demand is constant, moderate rises could continue. The Renters’ Reform Act will give tenants more security and bargaining power, which could further slow rent hikes.

In summary, 2026 should see a much calmer rental market,  great news for tenants after years of steep increases, though renting will still be expensive in absolute terms. It’s wise for renters to negotiate where possible (landlords prefer a good long-term tenant under the new rules), and if you’re thinking of renting vs buying, note that improving mortgage affordability might tilt the equation towards buying for some by late 2026.

5. How will the new planning reforms affect housing supply, and will we see more homes being built in 2026?
The government’s sweeping planning reforms introduced at the end of 2025 are aimed at significantly boosting housing supply. Changes like a default “yes” near train stations, higher density allowances, and cutting red tape for small sites should, over time, make it easier for developers to get projects approved. In the long run, this could be a game-changer that helps deliver the target of 1.5 million homes over 5 years.

However, in 2026 itself the impact will be limited. It takes time for projects to go through planning and actually get built. We anticipate more planning permissions being granted in 2026 as councils adjust to the new rules – so you might hear of big housing schemes getting the green light. But those newly approved homes likely won’t hit the market until 2027 or beyond. Meanwhile, 2025 saw a dip in construction activity due to high costs and uncertainty, which means the number of new homes completed in 2026 may not rise much and could even be slightly lower than 2025. The good news: by late 2026, as interest rates fall and confidence returns, builders are expected to ramp up starts again. In short, planning reforms pave the way for more supply, but patience is required.

For this year, don’t expect a sudden abundance of properties for sale, the housing shortage won’t vanish overnight. If the reforms stay on track, the hope is that from 2027 onwards, Britain will see a notable uptick in building, which over time will ease pressure on the market. Buyers in 2026 should keep an eye on future developments (it could inform where new supply and thus better affordability is coming), but shouldn’t count on a flood of options immediately. Use this year to get ready – because if the supply does improve in coming years, you’ll want to be in a position to act on a wider range of choices.

Ready to navigate the 2026 property market with confidence?

Now is the time to get your financing strategy in shape. Whether you’re looking to seize an opportunity or safeguard your current position, speak with our expert brokers for a free, no-obligation consultation. We’ll help you chart the smartest path, from securing bridging finance for that time-sensitive deal to structuring a high-net-worth mortgage that aligns with your global assets, or simply locking in a better rate on your existing loan.

The year ahead may be uncertain in parts, but with the right partner and plan, you can move forward decisively.

Contact Willow Private Finance today to discuss your goals and let us tailor a solution that turns market insights into your advantage. Together, let’s make 2026 a successful chapter in your property journey.