After years of surging prices, rising interest rates and then a period of stagnation, 2026 is widely expected to be a year of gentle recovery rather than a boom. Most market forecasts point to modest national price growth in the low single digits, with clearer differences emerging between regions and property types.
In short: 2026 is likely to feel more stable – but not necessarily more affordable.
With the help of leading Midlands Estate Agent, HoldenCopley, let’s take a look at how the UK housing market 2026 might shape up in 2026.
The economic backdrop: why interest rates and inflation matter
Interest rates expected to ease, but gradually
The Bank of England raised rates sharply in 2022–23 to combat inflation and then began trimming them as inflation cooled. By 2026, rates are expected to be lower than the peaks of the early 2020s, but not back to the ultra-low levels seen before 2022.
This means:
- Mortgage rates may continue to fall slowly.
- Buyer confidence could improve as monthly payments become more manageable.
- However, many homeowners will still be exiting very low fixed-rate deals, limiting how fast the market can accelerate.
Wages, inflation and household budgets
As inflation continues to stabilise and wage growth holds up, households should see gradual improvements in real income. This helps affordability but doesn’t erase the effect of high house prices, elevated rents and tighter lending rules.
The economic environment in 2026 is therefore supportive of stability rather than rapid growth.
Housing supply: persistent shortages keep prices supported
Constraints on housing supply remain one of the central drivers of the UK market.
- New-build delivery is still far below long-term national targets.
- Planning challenges, high construction costs and cautious developers are restricting housing starts.
- Affordable housing provision is also limited, placing additional pressure on both rental and ownership markets.
With no significant uplift in new supply expected in 2026, this scarcity is likely to underpin prices, even in a relatively subdued economic environment.
Regional expectations: where the biggest changes may occur
Housing market trends in 2026 are expected to differ sharply across the UK.
London: affordability remains a ceiling
London remains the least affordable region in the UK. As a result:
- Price growth is expected to be modest.
- Buyers face limits on borrowing capacity despite easing rates.
- Demand remains strong for well-located homes, but there is growing price sensitivity for flats, especially those with unresolved building-safety issues.
London is likely to be among the slowest-growing regions overall.
South East and East of England: steady but subdued
With high prices and stretched affordability, areas around London are likely to see only moderate price growth. Some commuter towns may outperform if improved transport links or relative value attract buyers, but overall these regions are expected to trail the national average.
North West, Yorkshire & the Humber, and North East: strongest growth potential
More affordable housing and strong employment hubs make northern regions some of the most promising for 2026.
- Prices are lower relative to incomes.
- Continued investment in cities such as Manchester, Leeds, Liverpool and Newcastle supports both rental and owner-occupier demand.
- Regeneration and build-to-rent schemes are boosting local markets.
These regions could see growth above the national average.
Midlands: a balanced, stable market
The Midlands typically sits between north and south on both price levels and affordability. With strong employment sectors and improving transport, this region is expected to perform solidly without leading the national league table.
Scotland, Wales and Northern Ireland
These markets each have distinct characteristics:
- Scotland: Strong demand in cities, steady price growth and comparatively better affordability than southern England.
- Wales: More balanced conditions following pandemic-era relocations, with South Wales likely to show the most consistent performance.
- Northern Ireland: Still relatively affordable, with potential for further price gains provided the economic backdrop remains stable.
How different property types may perform in 2026
Houses vs flats
Family houses with gardens remain highly sought after, especially in good school catchments. Flats may lag behind, particularly older blocks or those with cladding concerns. However:
- Well-located, smaller flats could see a rise in demand as affordability pressures push buyers towards lower-priced options.
- Modern energy-efficient apartments in city centres may also outperform less efficient or poorly located blocks.
New-build vs existing homes
New-build supply remains tight, supporting prices on quality developments. Developers are likely to continue offering incentives rather than making large price cuts.
Energy-efficient homes, whether new-build or modernised resales, are expected to continue outperforming as buyers place more value on running costs.
Affordability in 2026: who gains and who struggles?
First-time buyers
Many first-time buyers will face a mixed landscape:
Benefits:
- Mortgage rates easing compared with 2023 peaks
- Slower house price growth
- More property choice as supply gradually increases
Challenges:
- Saving a deposit remains difficult, especially in high-cost regions
- High rents make it harder to save
- Mortgage affordability tests remain tight
In more affordable regions, 2026 may offer the best opportunities for new buyers since before the pandemic.
Home movers
Those moving home may benefit from a more balanced market with less aggressive competition. However, anyone switching from an older low-rate mortgage to a new higher-rate deal will face increased monthly costs, which may limit their ability to trade up.
Renters
Renters are likely to remain under pressure due to:
- Limited rental supply
- Landlords leaving the market
- Ongoing population growth in major cities
Without a significant increase in rental stock, rents are unlikely to fall.
What could shift the outlook?
Several factors could change the trajectory:
- Faster-than-expected interest rate cuts
- A weaker economic environment or rising unemployment
- Major policy interventions (planning reform, stamp duty changes, housing schemes)
- Further constraints in construction activity
Any of these could either accelerate price growth or push the market into a flatter or declining period.
Final thoughts: a slow reset rather than a boom
The UK housing market in 2026 is likely to be calmer and more predictable than the turbulent years that preceded it. Prices should grow modestly, interest rates should ease, and regional variations will become more pronounced. However, supply shortages and affordability constraints remain major structural challenges.
For buyers and sellers, the key to navigating 2026 will be understanding local market conditions, focusing on long-term value, and paying close attention to interest rate movements.
