The Market at a Glance

The housing market has been a rollercoaster of late, and months of uncertainty and frenzied speculation about punitive property taxes ahead of the November Budget caused many buyers and sellers to slam on the brakes. However, with the worst fears failing to materialise, could we be in for a smoother ride in 2026?

“The mood is broadly positive,” says Mary Beeton, Head of Residential Sales and Residential Development at Hamptons. “We saw an immediate uplift in activity after the Budget. People are committed to moving this year and are launching at realistic prices after many price revisions over the past 12 to 18 months.”

With the inflation rate dropping to 3.2%, the Bank rate was cut in December for the fourth time last year, to 3.75%. As affordability has improved, buyer demand has risen.

“We now have some of the lowest mortgage rates since the Mini-Budget of 2022,” Beeton says. “There has been a lot of pent-up demand, with buyers waiting to see what happened to prices, inflation, mortgage rates and taxes post-Budget. And while it still feels like something of a rollercoaster market with plenty of macroeconomic and geopolitical volatility, the housing market looks more stable in 2026 than it has in a long time.”

Economic Outlook

Hamptons thinks inflation is likely to fall faster than anticipated, with two or three reductions taking the Bank rate to about 3.25% by the end of the year, with typical mortgage rates stabilising at around 4%. This should improve the availability of sub-4% mortgage deals, helping to support activity, and Hamptons anticipates price growth of 2.5% across Great Britain.

Regional Variations

London

There are some twists in the track, however. London has now underperformed the rest of the country for a decade, and Hamptons anticipates zero growth across Greater London in 2026.

The stamp duty increase after the holiday ended last April, plus tax issues including changes to non-dom status, have added to the already challenging backdrop for high-value markets, notably Prime Central London. The new council tax surcharge on homes over £2 million, coming in April 2028, adds yet another tax burden to the top end of the market. While it may dent sentiment, it’s unlikely to materially affect values as most prime buyers are expected to absorb the extra cost.

In 2025, 14.8% of London sellers sold at a loss, up from 6% in 2016. This, combined with the high cost of stamp duty, is encouraging many owners to stay put – in Prime Central London especially, owners are only selling if they need to, Beeton confirms.

However, on the flip side, this could be good news for buyers. “There are exceptional properties at compelling prices,” says Beeton. “If you’re buying for the long term this could be a very savvy time to purchase, and we are already seeing increased activity in super-prime segments as a result.”

While Hamptons expects small price falls for properties worth £1.9 million and above, this will be offset by growth in the mainstream London market. Here, easing mortgage rates are supporting buyer confidence, with first-time purchasers leading the charge.

“Price falls also mean some people can now buy more centrally than previously,” Beeton says. “Those who were looking at, say, Tooting, because they were priced out of Clapham, can now potentially afford Clapham. A property ambitiously priced at £750,000 in 2023 might actually sell for £675,000 now.”

Commuter Belt and Country Markets

With financial conditions improving and the return to office working entrenched, the commuter belt is firmly back on track. “We’re seeing particularly strong demand in locations with good connections, such as Beaconsfield, Sevenoaks and Caterham,” Beeton says.

However, the wider country market has been weighed down by tax rises for owners of second homes and is also reverting to a more normal, pre-Covid trajectory; Hamptons believes the mansion tax could cause a one-off price correction of about 5% in prime areas, particularly outside the capital where council tax is already higher.

“Lots of people still want to live in the countryside, but there’s more realism about travel times and fewer people are prepared to live more rurally,” Beeton says. “Meanwhile, cities such as Bath and Bristol continue to see good demand.”

Rental Market Trends

In the rental market, the pace has also slowed. Demand has weakened as falling mortgage rates mean more tenants have been able to buy. By the end of 2025, there were an average of 5.4 renters for every new property, down from 6.2 in 2024. Rental supply has also risen, reflecting the slowdown in tenant demand rather than an increase in landlord investment.

Rents ended last year broadly flat compared with 2024, while rental growth in 2026 is set to be weighed down by cooling wage growth and high unemployment, notably in roles typically filled by tenants, such as hospitality and graduate jobs. However, points out Catherine Westerling, Head of Residential Lettings at Hamptons, the company saw a 62% year-on-year increase in corporate lets in 2025 and also reports strong demand in January.

Hamptons forecasts rents across Great Britain to rise by 3.5% by the end of 2026. It also expects the implementation of the Renters’ Rights Act from May, combined with the structural supply shortage of rental homes, to put upward pressure on rents in future.

Despite warnings the Act would force many landlords to quit the sector, Westerling says most are actually buckling in for the ride. “While a few investors coming to the end of their holding period are selling, we are not seeing a mass exodus. Professional investors with larger portfolios remain committed to buy-to-let,” she explains.

“Our message for landlords is not to worry about the changes ahead, but also not to take chances. Engage a trusted, knowledgeable agent and learn from them through the transition.”