House prices across Great Britain are expected to rise modestly in 2026, ending the year about 2.5% higher, supported by easing inflation and interest rate cuts. Transactions should hold steady at around 1.15 million, with improving affordability offsetting wider economic and taxation concerns.
Yet caution will dominate. The Budget offered no buyer incentives, and political uncertainty looms for 2027 and beyond. While lower mortgage rates will help in the short term, prime property faces headwinds: confidence is fragile, and the run-up to the next general election could cast a long shadow.
London, once the engine of recovery, remains constrained by affordability pressures and tax reforms. Owners are increasingly locked in, while aspiring buyers struggle to climb aboard.
The new council tax surcharge, due in 2028, will likely hit prime country owners hardest - adding to the uncertainty that weighs on the upper end of the market. This marks a sharp departure from the traditional hierarchy, with the East Midlands set to overtake London as the strongest performing region since 2010.
2026 OUTLOOK
Inflation is likely to fall faster than many expect, enabling the Bank of England to order two or three more base rate cuts. We expect the base rate to end the year at around 3.25%, with typical mortgage rates stabilising near 4%. This should mean more loan deals below 4%, even for borrowers with smaller deposits - supporting prices and activity in most regions. London and prime markets will be the exception, however.
Earnings growth is running above inflation, boosting affordability. But, while some borrowers coming to the end of shorter-term fixed-rate loan deals are securing cheaper offers, some are still adjusting to more expensive repayments. In 2026 and 2027, some 600,000 borrowers will roll off sub-3% deals.
In light of these conditions, we forecast modest growth of 2.5% across Great Britain in Q4 2026, with London and the South broadly flat, while the Midlands and the North surge ahead.
"While lower mortgage rates will help in the short term, prime property faces headwinds"
The number of home sales in 2026 will remain broadly unchanged at 1.15million, driven mainly by needs-based moves as households seek extra space or relocate.
Normally, at this stage in the cycle, we would expect London to regain momentum. But confidence and affordability remain constrained, and the capital has consistently underperformed other regions since 2016. We expect this pattern to continue – a reversal of our previous assessment. It is our view that prices will remain unchanged across Greater London in 2026.
Tax changes over the past decade - including the end of the stamp duty concession, tougher non-dom rules, the mansion tax, and higher second-home SDLT - have weighed heavily. Speculation about further reforms to CGT and inheritance tax proved unfounded, but the council tax surcharge on £2m-plus homes could lead to small declines at the very top end. However, these are likely to be offset by rising prices in the mainstream market, where improving affordability and lower mortgage rates should begin to support buyer confidence.
Stagnant prime prices present a challenge - more owners are selling at a loss. In 2025, 14% of London sellers were forced to do so, against 6% in 2016. This discourages mobility, especially when they face a steep stamp duty bill on their next purchase. As a consequence, first-time buyers are becoming a major force in the London market, accounting for around half of London transactions this year.
The mansion tax debate has focused on London, but prime country markets often face higher council tax bills. While most owners will absorb the extra cost, we expect values of £2m-plus properties in these areas to fall by about 5% over the next year—a one-off adjustment as markets absorb the new regime. Even so, UK property taxes will remain less onerous than those in Europe or the US.
THE OUTLOOK FOR 2027–2028
We expect the rate-cut cycle to end in 2026, with inflation set to stay above the 2% target longer-term. Indeed, mortgage rates could edge higher in 2027 as markets begin to price in future base rate hikes. Against this backdrop, house price growth could slow to around 2.0% in Q4 2027 across Great Britain and 1.5% in Q4 2028.
Political uncertainty ahead of the 2029 general election will weigh on sentiment, particularly in prime markets. Taxation policy will serve as a levelling up mechanism, suppressing recovery in the upper tiers of the market in London and the South. In light of this, we forecast London prices to rise by 1.0% in 2027, before stalling again in 2028 as uncertainty about the future economic and tax regime creeps in.
The other causes of this slowdown will be stretched affordability and a lack of earnings growth for some workers, particularly impacting first-time buyers and renters. The headline numbers may indicate that wages are going up for all workers, but the figures will be inflated by a drop in entry-level jobs. These conditions mean that in real terms - adjusted for inflation - house prices will continue to underperform.
2028 AND BEYOND
By 2028, the North East will lead the growth league, with prices expected to be 16.4% higher than today, followed by Scotland (13.6%) and Yorkshire & The Humber (12.5%). This will represent a catch-up phase for these regions that have lagged behind since 2010.
But this outcome also marks a significant change in the property market hierarchy, with the capital losing its traditional position as a sure bet for long-term appreciation. Since the fourth quarter of 2010, the average property value in London has leapt by 84%, outpacing every other region. Average growth across the country over that period has been 74%.
"Taxation policy will serve as a levelling up mechanism, suppressing recovery in the upper tiers of the market in London and the South"
However, the rankings will start to alter. By the end of 2028, the East Midlands will have moved to the front, soaring by 94% since 2010, followed by the West Midlands (90%) and the North West (88%). Affordability and economic resilience will boost these regions. London will be relegated to fifth place, being the only region where prices remain below their 2022 level.
TRANSACTIONS
Sales will edge up to 1.2 million in 2027, before dipping back to 1.15 million in 2028, as election uncertainty bites.
Households are relocating less, opting for fewer, more ‘future-proofed' moves. The number of owner-occupied households is 10% higher than at the onset of the global financial crisis in 2008, but transactions remain 19% below pre-crisis averages.
The abolition of stamp duty would raise the annual total to 1.4 million, which would be close to the post-pandemic peak in 2021.
