The housing market appeared to have recovered from the distortions of the stamp duty increases earlier in the year when it ground to a halt again on fears about November’s budget.
Then came the Christmas and New year property market shutdown.
It might be hard to see what the property market is doing now, but It’s time to look at what 2026 may hold.
The budget effect
Removing the threat of an annual property tax on homes worth more than £500,000 came as a relief for those in higher-value areas.
However, mansion tax is coming. Homes worth £2–£2.5 million will pay £2,500 per year, rising to £7,500 for properties valued above £5 million. The government estimates fewer than 1% of properties in England will be affected, and the tax will not be charged until 2028, but it may depress demand and price inflation at the top end of the market.
With no major tax changes, the market can potentially find its feet again. But what direction will it take?
UK house prices dropped unexpectedly by 0.4% in December, according to the latest figures from the Nationwide Building Society
The average price for a home in the UK was £273,077 in the final quarter of the year, Nationwide said. By the end of December, it was £271,068.
Annual house price growth had been edging higher in October, before budget paralysis. might suggest that the overall direction for the market is one of recovery.
What happens in Spring?
After nearly four months of slower activity in late 2025, it might be fair to expect the market to regain momentum as we move into 2026.
There are several reasons to think so.
- First, there is clarity around future property taxation. Apart from the properties which will fall into mansion tax, the market could return to business as usual.
- Secondly, interest rates cut have been hinted by the Bank of England. Any fall could make mortgages more affordable.
- Thirdly, consumer confidence, currently still seen as depressed by most analysts may recover as 2026 moves forward.
- Fourthly, the relaxation of mortgage rules earlier this year could let lenders issue more generous home loans.
- Finally, demand for homes remains constant, and there is still not enough supply to meet that demand.
What could be the effect on prices?
According to property services company Savills, house price growth is set to be slow but positive in 2026, with a recovery between 2027 and 2030.
Their latest five-year house price forecasts suggest average property prices will grow by 2% in 2026, down from a previous prediction of 4% growth.
Northern England, Wales and Scotland will continue to see rises, while London and South East England will likely see the smallest increases in house prices.
Figures may be complicated by potential falls in the price of flats as small landlords quit the buy to let sector.
Beyond 2026, the UK economy is expected to be stronger, with lower inflation, rising GDP growth, falling unemployment and an undersupply of new homes resulting in upwards pressure on prices.
What should you do?
If you are ready to make a move, 2026 may offer opportunities with a slow but steady house price growth combined with falling mortgages.
There could still be bargains to be had, with motivated sellers and reduced competition from other buyers.
A suitable way to make the most of your housing plans is to start looking at them early. At Continuum we are ready to start looking with you.
What’s happening with UK house prices? Latest property market moves and forecasts | MoneyWeek
Should mortgage lending rules be relaxed to boost the UK economy? | MoneyWeek
What’s happening with UK house prices? Latest property market moves and forecasts | MoneyWeek
UK property tax changes 2026: How the “Mansion Tax” will works | HomeOwners Alliance
Properties worth more than £2m in England face mansion tax | BBC
UK house price growth ends 2025 on a softer note | Nationwide
This article is intended for general guidance only and is based on the opinion of Continuum it does not constitute financial advice. Individual circumstances vary, and you should consider seeking advice from a regulated financial adviser before making any decisions about your pension or retirement planning
Your home or property may be repossessed if you do not keep up repayments on your mortgage.
