Resilient housing market – but underlying pressures are building

The UK housing market again showed resilience in Q1. Despite static house price growth, activity did begin to recover following a slowdown in the run up to the Autumn Budget. However, transactions, planning and volumes remain below historic norms, while volatility through geopolitical and domestic political uncertainty continues to weigh on sentiment. The market is moving, but with little momentum and is likely to stall further in Q2.

House price growth is expected to lag wage growth and inflation in 2026 and, as a result, we have revised our forecast of house price growth to 1%. Some regions such as the North West, Yorkshire & Humber and the West Midlands may see increased prices between 3–4% but London and much of the South East will see minimal increases. Northern Ireland is likely to be an outlier and may see growth of up to 5%.

UK house price growth 2026: regional trends and transaction slowdown

Northern Ireland saw the largest quarterly price rise (3.85%) and continues to outperform amid uneven regional performance. Some Northern regions saw prices rise above 1%, while London posted its strongest quarterly growth in four years (1.7%), after prolonged underperformance.

House prices remain broadly flat across the UK, with annual growth of just 1.5%. Several regions, including the East Midlands and the South West, recorded declines. The underlying picture is one of resilience rather than growth. Affordability and viability constraints continue to limit development, while in some regions price growth is being driven by supply constraints against a backdrop of growing populations.

While new listings increased in early 2026, transactions remain subdued. Q1 completions reached 269,000, around 30,000 below the five-year quarterly average. In March 2025, we reported a large spike ahead of Stamp Duty Land Tax (SDLT) changes. This reinforces the impact tax levers can have on the market. Our Real Estate 360 outlook survey found 33% of respondents ranked Stamp Duty reform as the top incentive required to stimulate the market.

UK rental market faces structural shift as landlords exit

The rental market is undergoing a structural shift. Annual rental growth has cooled to 3.4%, a marked slowdown from the double-digit increases seen since 2023. At the same time, mounting regulatory, tax and compliance pressures are accelerating the exit of private landlords, with an estimated 220,000 fewer rental homes expected by the end of 2026. The introduction of the Renters’ Rights Act could intensify this contraction further.

In parallel, institutional capital is stepping in to fill the gap. Larger investors are scaling their portfolios and are better positioned to absorb regulatory change. Investment in Build-to-Rent (BTR) continues to expand, with single-family BTR in particular surging more than 50% year on year. However, the development pipeline is tightening, with completions outpacing new starts for nine consecutive quarters.

Against this backdrop, operators are doubling down on technology and AI to stay competitive. These tools are being deployed to streamline operations, enhance tenant experience and support ESG performance. As margins come under increasing pressure, operational efficiency is becoming critical to maintaining returns.

Planning reform and Stamp Duty changes remain critical

Recent policy developments, including the Planning and Infrastructure Bill and National Housing Bank, are positive steps but fall short of addressing underlying structural barriers. Without reform to key levers, such as Stamp Duty, a more effecient planning regime, and a credible plan to address construction labour shortages, delivery will remain constrained. As a result, the 1.5m homes target looks increasingly out of reach, with the delivery gap set to widen further.

Mortgage market volatility creates financing uncertainty

Housing demand showed continued recovery in Q1, with mortgage approvals reaching 362,000, 12% above recent quarterly averages.

However, momentum is fragile and may be short-lived. In March, mortgage lenders removed fixed deals at the same pace as during the aftermath of the 2022 mini-budget, driven by geopolitical tensions. Within a 48-hour window, approximately 8% of all available mortgage deals were pulled from the market, highlighting how quickly finance conditions can tighten and reinforcing uncertainty for both buyers and developers.

Interest rates expected to stabilise before 2027 cuts

Amid the uncertainty, the Monetary Policy Committee evoked a ‘wait and see’ vote, holding rates at 3.75% in April. The risks of rate hikes have risen and will depend on energy prices and the duration of the war in Iran. Our view is that any tightening cycle will be short, followed by rate cuts in 2027.

Our outlook and predctions for the UK housing market in 2026

The UK housing market has remained resilient, but growth expectations have been reset once again.

The conflict in the Middle East has led to a cautious March but a further fall in sentiment for build volumes in 2026. Mobilisation has slowed and consumer confidence has taken a hit. The key issue is increasingly one of site viability, balancing rising supply chain costs against more modest house price growth.

Now more than ever, targeted policy shifts are needed. Incentives to stimulate the housing market and accessible, affordable debt should be on the top of the government’s agenda. Without this, housebuilders will continue to grapple with a lack of uncertainty around site viability and struggle to predict volumes for demand. 2026 is set to be a year of uncertainty as the industry again rides the waves of macro and political uncertainty.

• House prices will increase by 1–2% during 2026, a reduced increase from early predictions of 4%.
• House prices are expected to grow by 22% in the five years to 2030.
• Housing completions will fall further in Q2, driven by inflationary pressures and continued pressure on household disposable incomes.
• Housing volumes will stagnate in Q2 and see an increase in volumes returning in later quarters of 2026.
• The market expects the Bank of England to factor in three rate hikes this year, with inflation likely to reach 4% by the end of 2026.
• Mortgage reform is expected to boost borrowing capacity for homeowners, providing further support to housing market demand.

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