Forecasts point to modest price rises, stable rates and weaker growth in London and prime markets
Housing market projections for the period to 2028 point to modest price rises, subdued activity and growing regional divergence, as tax policy and political risk play a larger role in shaping demand.
Following the Autumn Budget, residential estate agent Hamptons said the outlook for the mainstream market is clearer, but broad demand-side support such as Help to Buy or a cut to stamp duty remains absent. Instead, recent measures have been focused on higher-value homes, including a council tax surcharge on properties worth more than £2 million and higher tax on property income for landlords, affecting only a small part of the market.
For mortgage professionals, the forecasts suggest a calmer rate environment by 2026, limited price growth overall, and weaker conditions in London and prime sectors than in many regional markets.
Rates and affordability: limited easing, modest recovery
Forecasters expect inflation to fall more quickly than previously assumed in 2026, creating scope for two or three bank rate reductions. Bank rate is projected to stand at around 3.25% by the end of 2026, with typical mortgage rates stabilising close to 4%. This would support a wider range of sub‑4% products, including options for clients with smaller deposits.
Headline affordability metrics are improving as wage growth outpaces inflation. Some borrowers coming off shorter fixed terms are seeing monthly repayments fall, though many households are still adjusting to higher costs than during the ultra‑low rate era. Around 600,000 borrowers on sub‑3% five‑year fixes are expected to refinance in 2026 and 2027, which will remain a key focus for brokers and lenders as these customers transition to higher rate environments.
Against this backdrop, house prices across Great Britain, measured using the ONS House Price Index, are forecast to rise by 2.5% in the fourth quarter of 2026, with stronger growth anticipated in the Midlands and North where affordability is less stretched. Transaction numbers are projected to sit at about 1.15 million, supported mainly by needs‑based moves such as upsizing and relocations, and to remain slightly below pre‑financial crisis norms. With no stamp duty holiday on the horizon, market activity is likely to depend more on economic conditions than on short‑term policy incentives.
London and prime: higher taxes and weaker capital growth
In a typical cycle, London might be expected to lead a recovery once affordability begins to improve. This time, however, the capital’s rebound appears muted. Since 2016, London has underperformed the rest of Great Britain, and the latest forecasts suggest that this trend is set to continue, reversing earlier expectations of a stronger comeback.
For 2026, price growth across Greater London is forecast to be flat, as the market absorbs recent tax changes. While values in the £1.9 million‑plus segment are expected to edge lower, this is likely to be offset by modest gains in the mainstream market, supported by slightly better affordability and easing mortgage rates.
A particular concern is the lack of price growth in prime locations, especially Prime Central London. A rising share of owners there are crystallising losses when they sell: in 2025, 14% of London sellers sold for less than they paid, up from 6% in 2016. This, combined with high Stamp Duty Land Tax on onward purchases, is discouraging discretionary moves and limiting the supply of higher‑value stock.
First-time buyers now account for around half of all sales in the capital, giving them a growing influence on market dynamics. At the same time, higher stamp duty, changes to non‑dom arrangements and debate around capital gains and inheritance tax are weighing on sentiment in the upper tiers. The planned council tax surcharge on homes valued at more than £2 million is expected to add to costs at the top end and further dampen values.
Prime country markets may come under even more pressure from the surcharge, as council tax bills are already higher than in London. These areas posted strong growth in the post‑pandemic period, but rising tax burdens and political uncertainty are now encouraging many potential movers to hold back. Properties above £2 million are expected to see price falls of about 5% as a one‑off adjustment, after which values are forecast to stabilise. Overall property tax rates in the UK nonetheless remain below those in many European and US markets.
2027–2028: higher‑for‑longer inflation and political risk
The rate‑cutting phase is expected to conclude by 2026, with uncertainty rising thereafter. Inflation is projected to remain above the 2% target, and mortgage rates could start to edge up again in 2027 as markets price in future increases in interest rates.
Under this scenario, house price growth across Great Britain is forecast to slow to about 2% in the fourth quarter of 2027 and 1.5% in the fourth quarter of 2028. Political risk is expected to become a more significant driver of sentiment, particularly in prime markets, as the planned 2029 general election approaches. Tax policy is increasingly being used as a levelling‑up mechanism, limiting the scope for recovery in higher‑value markets in London and the South.
London is forecast to see growth of around 1% in 2027 before stalling again in 2028, with stamp duty and other charges continuing to weigh on turnover. In real terms, prices are expected to underperform as stretched affordability and uneven wage growth erode purchasing power, with first‑time buyers and renters likely to feel the greatest strain.
Over the four‑year forecast period, the North East is expected to deliver the strongest cumulative price growth, at 16.4%, followed by Scotland at 13.6% and Yorkshire and the Humber at 12.5%. These regions have experienced some of the weakest growth since 2010, and the projected gains are seen as a catch‑up phase rather than a sign of overheating.
Longer‑term shift towards the Midlands and North
Since house prices bottomed out in the fourth quarter of 2010, London values have risen by 84%, ahead of every other region and the Great Britain average of 74%. Over the coming years, however, that position is expected to change.
From 2026, the East Midlands is forecast to overtake London on cumulative price growth since 2010, with the North West and West Midlands expected to follow by the end of 2027. By 2028, average prices across Great Britain are projected to be 84% higher than in 2010. The East Midlands is forecast to be the strongest performer over that period, with growth of 94%, followed by the West Midlands at 90% and the North West at 88%. London is expected to fall to fourth place and to be the only region where average prices remain below their 2022 peak, reflecting better affordability and more resilient local economies in parts of the Midlands and North.
Transactions: fewer moves and more “future‑proofing”
Transaction volumes across Great Britain are forecast to edge up to 1.2 million in 2027 before easing back to 1.15 million in 2028, as pre‑election uncertainty feeds into buyer and seller behaviour, particularly in higher‑value segments. The market is expected to become more sensitive to political events, with greater short‑term volatility around major announcements.
Despite a 10% rise in the number of owner‑occupied households in England since 2008, transaction volumes remain around 19% below the average level recorded in the three years before the global financial crisis. Without current tax frictions, there could be around 100,000 additional moves each year. If stamp duty were abolished altogether, annual transactions could regularly exceed 1.4 million, in line with the post‑pandemic peak in 2021.
For intermediaries, this points to a market with fewer but more considered moves, as clients seek to “future‑proof” both property choices and borrowing arrangements, and as policy changes increasingly influence when and how they transact.
“The housing market has always mirrored the mood of the nation,” said Aneisha Beveridge (pictured right), head of research at Hamptons. “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.
“But 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.”
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