Looking back at the housing market in 2025 and what we can expect from the UK Housing Sector in 2026.
Where next in 2026?
Looking ahead, we expect housing market activity to strengthen a little further as affordability improves gradually (as it has been in recent quarters) via income growth outpacing house price growth and a further modest decline in interest rates. We expect annual house price growth to remain broadly in the 2 to 4% range this year.
The changes to property taxes announced in the Budget are unlikely to have a significant impact on the market. The high value council tax surcharge is not being introduced until April 2028 and will apply to less than 1% of properties in England and around 3% in London. The increase in taxes on income from properties may dampen buy-to-let activity further and hold down the supply of new rental properties coming onto the market, which could in turn maintain some upward pressure on private rental growth.
Rental supply likely to reduce in 2026
Thousands of UK landlords are expected to leave the private rental sector in 2026, following the 93,000 who left last year.
Property purchasing firm LandlordBuyer says the combination of regulatory reform, financial pressures, and growing uncertainty is triggering a sustained shift in the UK housing landscape.
Data from a recent English Private Landlord Survey, revealed that:
- 31% of landlords plan to reduce the size of their portfolio, and
- 16% of landlords said they are considering selling all their rental properties within the next two years.
It claims the Renters Rights Act, which became law last month, abolished Section 21 evictions, a move that – while welcomed by tenant advocates – has been a tipping point for many small-scale landlords.
More evictions in Q1 2026
The Renters’ Rights Act will come into force in May 1 2026, which will bring in the Section 21 eviction ban, a landlord database and introduction of a property ombudsman.
Given what’s coming, it wouldn’t surprise me to see a spike in eviction notices in the first quarter. While everyone has an opinion on Section 21, once it’s scrapped it will become more problematic for landlords to evict a bad tenant.
The court system has been creaking for some time, with it taking many months to get a court date, escalate cases to the high court and get a court-appointed bailiff – and I see no reason why this wouldn’t get even worse without Section 21.
Combined with high interest rates, tougher energy efficiency rules (such as EPC targets), and tightening local authority licensing, the ability to operate a profitable rental portfolio is becoming increasingly difficult, it goes on to say.
LandlordBuyer managing director Jason Harris-Cohen stated “the sector is reaching a critical tipping point. The 93,000 landlords who left in 2025 were just the start. What we’re seeing now is a wave of private landlords, particularly those with one or two properties, choosing to exit before legal, financial or regulatory risks increase further. Selling with tenants in place is becoming the norm, not the exception.”
Rent inflation, already running above wage growth, may worsen if more landlords leave the sector without being replaced.
Rightmove:
Our property experts predict that new seller asking prices will rise by 2% by the end of 2026
House price growth will differ depending on region, with lower-priced Scotland, Wales and northern England markets expected to see stronger growth, whilst London house prices could lag behind.
It’s a more positive year for first-time buyers, thanks to a good choice of available homes, improving affordability and lower mortgage rates lower than 2025.
The UK housing market looks set to improve in 2026, with more people likely to make their move and house prices showing modest growth. Affordability is improving, and buyers and sellers are making new plans following the tax changes announced in the Budget.
Some first-time buyers could take advantage of 2026 market conditions due to a good choice of available homes for sale, average wage growth outpacing property prices and lower mortgage rates. Meanwhile, the introduction of a mansion tax coming into place in 2028 is likely to create a sluggish top-end of the market next year.
What will happen to house prices in 2026?
Our house price predictions for 2026 suggest that new seller asking prices will rise by 2% by the end of the year. While this represents positive growth, it also reflects a market finding its balance after a few years of economic uncertainty and a quieter market at the end of 2025.
Buyer affordability
Buyer affordability should increase throughout 2026. Mortgage lenders have been looking at ways to loosen their lending criteria to help people responsibly borrow more. We predict that the increased spending power buyers have will boost property prices slightly. However, house price growth will remain behind average wage growth and inflation, making homes more affordable in real terms.
How will the economy impact house prices in 2026?
Interest rates improving
The Bank of England’s Base Rate decisions will continue to influence mortgage costs throughout 2026. Market expectations suggest we’ll see further rate cuts next year, which should help mortgage rates edge lower. Some experts expect the rate to fall to 2.75% in 2026.
Inflation stabilising
Inflation affects everything from building materials to household running costs. As inflation continues to stabilise, this should support steady, sustainable growth in the housing market rather than the sharp price movements we’ve seen in recent years. With house price growth expected to remain below inflation, homes are becoming more affordable in real terms.
Wage growth improving affordability
People’s incomes are expected to grow faster than property prices in 2026, which will gradually improve the balance between earnings and housing costs. This is particularly beneficial for first-time buyers working to save their deposits.
Government policy and taxes that impact housing
The Autumn Budget introduced several changes that will affect the housing market longer term. The new mansion tax on homes worth more than £2 million will impact the top end of the market from April 2028.
Meanwhile, the 2% increase in income tax on rental income for landlords comes into effect in 2027 – this could influence the rental market and potentially affect some would-be first-time buyers. Whilst these policy changes don’t come into force next year, we expect buyer and seller behaviour will change beforehand.
Zoopla:
First-time buyers accounted for the largest share of completed sales in 2025, and they are expected to continue to be the dominant buyer group in the housing market in 2026, according to Zoopla’s Executive Director, Richard Donnell.
The portal’s data shows they made up around two in five home sales in 2025. That is equivalent to approximately 470,000 purchases and is a 20% increase on the number of completed purchases compared to the previous year.
Those levels are expected to hold steady in 2026, although total transaction volumes in the wider housing market are forecast to soften slightly to around 1.18 million.
Zoopla expects average UK house prices to increase by 1.5% over 2026 with a stronger than usual start to the year due to a release of pent-up demand as buyers return to the market having delayed decisions in the run-up to the Budget.
This will support housing sales, which are expected to total 1.18m over 2026.
House prices are expected to continue to rise at an above-average pace, over 2.5% across the Midlands, northern England, Scotland and Northern Ireland in 2026. Lower house prices in northern England and Scotland mean better buyer affordability and higher rate of house price inflation.
Nationwide and Halifax:
Average house prices could grow by up to 4% next year, if forecasts by major lenders prove to be correct.
Nationwide is perhaps more bullish, expected house price growth of between 2% to 4% as affordability improves and interest rates are cut, while Halifax has forecast growth of between 1% and 3%.
Halifax states they expect house prices to rise modestly, by somewhere between 1% to 3%. While wage growth is expected to slow and unemployment may edge higher, lower interest rates and easing inflation should help to gradually improve homebuyers’ purchasing power.
What’s new for landlords in 2026?
It is an understatement to say that 2026 is going to be a significant year for landlords.
We not only have the implementation of the tenancy reforms in the Renters' Rights Act on 1 May, but we also have the start of the MTD roll-out on 6 April and new metrics for measuring the energy efficiency of residential properties are promised.
The long-awaited draft Leasehold and Commonhold Reform Bill is due to be published soon, which should not only "reinvigorate" commonhold, but also abolish forfeiture an "tackle" ground rent, whatever that means.
What does 2026 hold for housebuilding?
After a turbulent 2025, our industry enters 2026 with a renewed sense of purpose. Last year pushed every part of the market, from developers and local authorities, to planning teams and registered providers, to rethink the way we work. While many of the challenges were unexpected, the response across the sector has been overwhelmingly positive. A drive towards innovation, partnership, and higher standards is now shaping the landscape for the future.
Key trends to watch in 2026:
- Planning reform that finally speeds things up
- Affordable housing demand will rise
- Open-market uncertainty will continue
- Build-to-rent will plateau