Executive Summary: Yes, modest price falls of 1-3% are forecast for 2026, driven by persistent affordability issues and the full impact of Budget 2025 tax changes. However, a severe crash is unlikely due to constrained housing supply.
The 2025 Autumn Budget failed to introduce significant new housing supply incentives, instead focusing on maintaining tighter monetary policy to curb inflation. This capping of price growth means 2026 is shaping up to be a 'correction year' rather than a boom, with regional disparities becoming more pronounced.
Market Briefing: Key Points
- **Forecast:** Expect a minor national price dip of 1-3% in 2026.
- **Budget Impact:** 2025 Budget offers no 'silver bullet' for affordability; stamp duty thresholds remain unchanged.
- **Regional Divide:** London and the South East face higher downside risk; Northern regions may see prices hold steady.
- **Interest Rates:** Base rates are expected to stabilise in 2025, but will not return to ultra-low levels, keeping buyer demand muted.
Current Market Trends (2025)
As of late 2025, the UK market is defined by low transaction volumes and stubborn asking prices. Sellers are reluctant to accept offers below 2024 levels, while buyers face mortgage rates hovering around 4.5-5%. Typical house prices range from £285,000 nationally to over £550,000 in London. Market sentiment indicates a 'wait-and-see' approach, with properties taking 20-30% longer to sell than in previous years.
Buyer & Seller Advice
For Buyers: Use the muted demand in 2025 to negotiate aggressively. Focus on properties that have been on the market for over 12 weeks. Ensure you have a Decision in Principle ready, as lenders are stress-testing against rates near 8%.
For Sellers: Price realistically from day one. The '2024 premium' is no longer sustainable. If you need to sell quickly in 2025/2026, price 5% below comparable sold data to trigger interest.
Future Outlook (2026)
Heading into 2026, the market will likely shift from a 'seller's stalemate' to a 'buyer's market.' If the Bank of England cuts rates by Q2 2026, transaction volumes will recover, but price growth will remain capped by strict affordability criteria. The post-Budget economic environment suggests that while unemployment won't spike, wage growth will struggle to outpace the cost of borrowing, exerting downward pressure on nominal house prices.
Common Questions
No. While prices may fall slightly (1-3%), the structural shortage of homes and strict lending criteria prevent a 2008-style crash. The 2025 Budget focused on stability, not boom-or-bust economics.
The South East and London are most exposed due to high price-to-income ratios. Northern England and Scotland are expected to be more resilient, potentially seeing price stagnation rather than falls.
The Budget did not extend stamp duty cuts or offer new buyer subsidies. By keeping fiscal policy tight to manage inflation, it contributes to a slower, more stable market correction rather than a recovery.
Mortgage rates are expected to edge down slightly in 2026 if the Bank of England base rate falls. However, rates are unlikely to return to the sub-2% deals seen in the early 2020s.
2026 could be a strategic entry point. With prices softening and less competition, buyers with secure financing can negotiate better terms. However, ensure you have a buffer for potential further rate fluctuations.