UK Housing Market Outlook 2026
Regional Growth, First-Time Buyers & What Comes Next
As the UK property market moves into 2026, the data points to a clear shift away from the stagnation and uncertainty that defined much of the previous cycle. Price growth has returned — but unevenly — while buyer behaviour is evolving in response to improving affordability, easing mortgage rates and widening regional opportunities.
Rather than a broad-based boom, the market is entering a phase of measured growth, strong regional divergence and renewed buyer confidence, particularly among first-time buyers.
This analysis explores the key numbers, trends and structural changes shaping the UK housing market.
UK House Prices in 2025: Regional Performance Tells the Real Story
According to major UK mortgage lender data, average house prices across the UK rose by approximately 3.7% during 2025. However, this headline figure masks significant variation by region, city and buyer profile.
One of the standout performers was Plymouth, which recorded the steepest house price growth in the UK, with values rising by around 12.6% over the year, taking the average property value close to £280,000. Growth in the city has been supported not just by affordability, but by lifestyle and community appeal.
According to quality-of-life research, Plymouth ranked third nationally for community strength, placed highest overall for life satisfaction, and recorded the highest happiness score, with residents rating the city 7.8 out of 10. This reflects a wider shift in buyer priorities towards liveability, wellbeing and community alongside traditional employment drivers.
Elsewhere, Hull entered the top ten locations for house price growth for the first time, with values rising 6.5% during 2025. The city’s improved performance has coincided with regeneration investment, cultural visibility and growing recognition as an emerging lifestyle destination, attracting both owner-occupiers and value-focused investors.
At a regional level, Northern Ireland was among the strongest performers, with price growth approaching 6%, highlighting how constrained supply continues to support values outside the South East.
London and Prime Markets: Stabilisation, Not Recovery
London remained the only UK region where prices stalled during 2025. Average values dipped by 0.1%, bringing the typical London home to approximately £574,514, still the most expensive market in the country.
Within the capital, performance varied:
Prime central London values fell by 0.9% in the final quarter, an improvement on the 1.8% decline recorded previously
Prime outer London neighbourhoods, more reliant on domestic buyers, saw prices dip by just 0.2%
Prime regional markets declined by 0.6%, less than half the pace recorded during the summer
Despite recent stabilisation, prices in London’s most established prime neighbourhoods remain around 25% below their 2014 peak, underscoring the scale of the long-term correction.
By contrast, Scotland emerged as the strongest-performing prime market in 2025. Prime values held steady overall, while prime Edinburgh prices rose by 2.1% year-on-year, driven by constrained supply.
The country house market also showed early signs of bottoming out, with quarterly price falls easing sharply towards the end of the year after a subdued period.
Affordability Shifts and the Return of First-Time Buyers
According to lender and housing market data, first-time buyers are set to play a central role in market activity during 2026.
This shift has been driven by a combination of improving affordability conditions and renewed confidence among buyers who previously paused their plans. Mortgage rates have eased, with some fixed-rate products now available below 4%. At the same time, earnings growth has continued to run ahead of inflation, while house price inflation has moderated. Increased competition among lenders has also led to more flexible affordability assessments.
Together, these factors have delivered a meaningful improvement in first-time buyer affordability.
According to Halifax, monthly mortgage costs for first-time buyers as a share of income are now at their lowest level since 2022. Industry economists note that in 2023, a typical first-time buyer purchasing with a 20% deposit was spending over 38% of income on mortgage repayments. By late 2025, that figure had fallen to around 33%, much closer to the long-term average of approximately 30%, with expectations that this ratio will continue to ease further during 2026.
Estate agents are reporting rising enquiry levels from first-time buyers who delayed purchases during 2024 and early 2025 and are now re-entering the market with improved confidence and stronger affordability metrics.
2026 House Price Forecast: Stability Over Speculation
Most forecasts suggest UK house prices will rise by between 2% and 4% during 2026, with growth concentrated at the lower end of that range.
Looking further ahead, projections indicate around 4% growth in 2027, followed by potential rises of up to 5.5% in 2028, assuming interest rates continue to normalise and economic conditions remain supportive.
This trajectory reflects a market transitioning into a longer-term recovery phase, where improved affordability and steady demand — rather than rapid price inflation — underpin activity.
Transaction volumes are expected to stabilise above 2024 levels, supported by clearer mortgage pricing, easing borrowing costs and improved buyer sentiment.
Rental Market Pressures Remain Intact
While affordability has improved for buyers, rental markets remain under sustained pressure.
Rents continued to rise throughout 2025 and are expected to increase again in 2026 due to:
Persistent undersupply of rental homes
Reduced levels of new buy-to-let investment
Ongoing population growth and household formation
This divergence continues to widen the gap between renting and owning, further incentivising first-time buyers to purchase where possible and reinforcing long-term rental demand.
Key UK Housing Market Figures
Average UK house price growth (2025): ~3.7%
Highest-performing city (2025): Plymouth (+12.6%)
London annual growth (2025): -0.1% (average price ~£574,514)
Prime Edinburgh annual growth (2025): +2.1%
Forecast UK house price growth (2026): 2–4%
Forecast UK house price growth (2027): ~4%
Forecast UK house price growth (2028): Up to ~5.5%
First-time buyer affordability: Strongest since 2022
Figures based on lender data, national indices and housing market surveys.
What This Means for First-Time Buyers vs Investors
For First-Time Buyers
Affordability conditions are the most favourable seen in several years. Lower mortgage rates, improving income ratios and slower house price growth mean buyers entering the market in 2026 face a more balanced environment, with less urgency and greater choice. Those with stable employment and deposits may find 2026 an attractive entry point before affordability tightens again later in the cycle.
For Investors
Opportunities are increasingly region-specific. Capital growth is strongest in affordable, lifestyle-led markets with constrained supply, while rental demand remains resilient nationally. The focus should be on fundamentals — yields, tenant demand and long-term growth drivers — rather than relying on short-term price inflation.
Final Thoughts: A Market Rebalancing Through Affordability
The defining feature of the UK housing market entering 2026 is not rapid price growth, but improving affordability.
With mortgage costs easing, earnings rising in real terms and price growth moderating, the market is rebalancing after several years of strain. Regional markets with strong quality-of-life appeal and affordability are outperforming, while London and prime markets continue to stabilise following a prolonged correction.
For buyers, this represents one of the most accessible entry points seen since before the interest-rate shock. For investors, success will depend on precision, regional insight and long-term thinking, rather than broad national assumptions.
As the next phase of the cycle unfolds, those who understand the relationship between affordability, supply and demand — rather than chasing headlines — will be best positioned to benefit.