While you don’t have to look too hard to find signs of doom and gloom, the second half of 2026 may be shaping up better than many expected even a month or two ago.
Conditions in the South of England may be tricky, but deals continue to proceed if the parties involved can be patient and pragmatic, and the pricing of the property is realistic. While higher mortgage rates have tempered demand, they have not brought activity to a standstill.
Elsewhere, cooling inflation is offering some support by improving the outlook for mortgage pricing and giving buyers a little more confidence. Meanwhile, demand from first-time buyers longing to leave renting behind remains an important source of activity, even in prime markets. Despite the headwinds facing the market, the number of homes changing hands continues to hold up better than many might have expected.
Even so, mortgage rates remain higher than they were earlier in the year, which has continued to weigh on demand. Stock levels are rising, as almost half of registered movers at Hamptons are waiting to find a buyer before starting the search for a new home. This trend has not halted transactions but has sparked a wave of summer price adjustments and slowed the pace at which many would-be movers are progressing from one home to the next.
The new North-South divide
House price growth has slackened nationwide. But the slowdown is most marked in London, where just 30% of homes have risen in value over the past 12 months. This is the lowest proportion anywhere in England.
Across the South, capital appreciation remains the exception rather than the rule. Over the past 12 months, 46% of homes in the South East grew in value. In the South West, it was 48%.
By contrast, in the East of England, popular with first-time buyers, 69% rose in value. The North West, which tends to be more affordable, led the league with 74% of homes increasing in value.
As borrowing costs remain elevated, affordability is playing an increasingly important role in determining where prices continue to rise. Markets where buyers can stretch further are generally proving more resilient than those where affordability constraints were already more acute.
Houses are firmly in favour
The performance of flats and houses continues to diverge. In almost every region, houses are retaining their value, while flats are lagging or indeed falling. A mere 2% of flats are worth more than a year ago. In London, 59% of houses have moved upwards in value - by contrast, the average flat value has not risen in any borough
Seasonal price cuts
More sellers are dropping their prices, with reductions running 2% above last year's levels. The average cut is 2.9%, up from 2.7% a year ago.
Seasonal patterns are still determining price adjustments. The number and the size of cuts begin to increase in the spring, peak in the summer and then decrease in the autumn, as sellers aim to seal the deal before Christmas. Those who fail to secure a buyer by that deadline often take their homes off the market or wait out the winter freeze until interest begins to revive in the new year.
The changing buyer dynamics
Overall, there’s been a 14% decline in those registering to buy a new home. Owner-occupiers make up the majority of those starting the search, but higher mortgage rates have dampened demand from more discretionary movers. This is particularly true of upsizers, who often need to borrow more to bridge the gap between the sale of their current home and the purchase of a larger one.
Yet, there has also been a 10% jump in the number of first-time buyers embarking on the hunt since this time last year. And while mortgage rates may now be materially higher than earlier in the year, the wish to exit the rental sector remains strong.
There are also 6% more people looking for a second home and 5% more interested in acquiring a buy-to-let property, although these groups account for a limited number of transactions.
"The market may end 2026 in a similar fashion to how it started. "
Record stock levels
The number of homes for sale is at a record high. This is largely the result of people postponing the search for another place until they have found a buyer for their existing property.
Among those sellers who are registering with Hamptons to look for their next home, as many as 50% have yet to line up a buyer for their current property, against 40% a year ago. This is limiting mobility, with many would-be movers reluctant to take the next step until they have greater certainty over their own sale.
As a result, chains are taking longer to form and mobility across the market has slowed.
Outlook
Against what many would describe as a gloomy backdrop, the number of homes changing hands during May nudged up 1% on the same time last year. And numbers are on track for a similar outcome in June.
While activity remains muted, the market has proved more resilient than expected. The combination of easing inflation and improving mortgage pricing should gradually support affordability and confidence over the months ahead. While the summer months are likely to bring the usual seasonal lull, lower borrowing costs could help support a pick-up in activity this autumn, leaving market conditions looking more akin to those seen at the start of 2026 than many currently anticipate.
