House prices are forecast to record modest growth next year as falling inflation and lower mortgage rates offer support, although political uncertainty and tax pressures are expected to weigh on the market from 2027 onwards.
Projections from Hamptons suggest prices across Great Britain will rise by 2.5% in the final quarter of 2026, with transaction levels holding steady at around 1.15 million.
The forecast points to a stable 2026 underpinned by easing borrowing costs. The Bank Rate is expected to fall to about 3.25% by the end of that year, with typical mortgage rates settling near 4%.
Earnings growth outpacing inflation should continue to improve affordability for many households, even as some borrowers adjust to higher repayments when fixed-rate deals expire.
POLITICAL RISKS
While the outlook remains relatively positive for the mainstream market, higher borrowing costs and political risk are anticipated to curb house-price growth from 2027.
Hamptons expects annual growth to slow to 2% in 2027 and 1.5% in 2028. Prime markets look set to be the most subdued, weighed down by tax policy changes and a lack of mobility at the top end of the market.
One of the most notable trends is the reshaping of the regional house-price cycle. Since prices bottomed out after the 2008 financial crisis, London has consistently led long-term price growth.
But Hamptons forecasts that by next year the East Midlands will overtake the capital, with the North West and West Midlands to follow by the end of 2027.
By 2028, London is expected to be the only region where average prices remain below their 2022 peak.
BALANCE OF POWER SHIFTING
Aneisha Beveridge, head of research at Hamptons, said: “The housing market has always mirrored the mood of the nation. While the headlines have been dominated by uncertainty, underneath it all, we’ve seen signs of resilience.
“Inflation is easing, mortgage rates are falling, and affordability is improving, which should support modest price growth next year.”
TAX AND POLITICS DRAG
But she added: “It’s hard to ignore the growing drag of taxation and politics. London, which historically leads recoveries, is being held back by higher stamp duty and broader tax anxieties, locking some owners into their homes and others out of buying them.
“The next phase of the cycle will be shaped less by discretionary moves and more by pragmatism – with policy playing an increasingly central role in determining who moves, when, and where.
“At the same time, the balance of power is shifting: the Midlands is forecast to have seen more price growth than London since prices bottomed out after the 2008 financial crash.”
MUTED GROWTH IN LONDON
Following the Autumn Budget, Hamptons has revised its forecasts to reflect new policy measures.
While the Budget provided some clarity for the broader market, it stopped short of introducing demand-side stimulus, such as Help to Buy or a stamp duty cut.
New taxes, including a council-tax surcharge on homes valued above £2 million and higher property income tax for landlords, are expected to affect only a small portion of transactions.
In the capital, growth is likely to remain muted. Hamptons expects flat prices across Greater London in 2026, with higher-value homes continuing to face pressure.
Some 14% of London sellers made a loss on their sale last year, compared with 6% in 2016, discouraging owners from moving and increasing reliance on first-time buyers, who now account for half of all sales.
STRONGEST GROWTH
Regionally, the North East, Scotland and Yorkshire & the Humber are forecast to see the strongest growth through to 2028, reflecting a catch-up with regions that surged earlier in the cycle. By contrast, price growth in the South is expected to remain subdued as affordability constraints and tax burdens persist.
Transactions are forecast to rise slightly to 1.2 million in 2027 before dipping to 1.15 million in 2028 as political uncertainty ahead of the planned 2029 general election leads to caution, particularly in prime markets.
Despite an increase in owner-occupied households since 2008, annual transaction levels remain well below pre-financial crisis norms, held back by stamp duty and other structural costs.
Hamptons estimates that without current tax barriers, around 100,000 additional moves would take place each year. If stamp duty were abolished entirely, annual transaction volumes could exceed 1.4 million – a level last seen during the post-pandemic surge of 2021.
