‘Bottom-up’ recovery predicted for housing market in 2026 as activity returns

The housing market is set for a strong start in 2026, according to property experts, as home buyers make the most of falls in mortgage rates and put some of last year’s uncertainties behind them.

Experts predicted the recovery will be “bottom-up” rather than “top-down,” with some challenges at the upper end of the market and first-time buyers remaining a “driving force” on the first rung of the property ladder.

The base rate was cut from 4% to 3.75% in December, bringing an early Christmas present to some mortgage holders. Around 1.8 million fixed-rate mortgages are due to expire in 2026, according to figures from UK Finance.

Last year’s see-saw housing market saw buyers in England rushing to beat a stamp duty deadline in the initial months of the year which also heavily impacted sales in Wales.

Around 177,370 home sales took place across the UK in March 2025 – around double (a 104% increase) the number compared with the 86,810 sales recorded in March 2024 – according to HM Revenue and Customs (HMRC) figures.

But in the second half of the year, some activity was put on hold as some potential buyers took a pause amid speculation over possible changes in the autumn Budget.

The Royal Institution of Chartered Surveyors (Rics) previously reported that the volume of new home buyer inquiries deteriorated to the weakest level recorded in around two years in November.

Some buyers entering the market now may find they can snap up more of a bargain than a couple of months ago. According to property website Rightmove, the average asking price for a home in Britain fell by £6,695 month-on-month in December, reaching £358,138.

Colleen Babcock, a property expert at Rightmove, said: “We predict the market will look and feel very different depending on which area of Great Britain you’re in, and the type of property you’re looking to sell or buy, with big differences particularly between the south of England and the rest of Great Britain.”

She said market conditions in 2026 “will favour typical first-time buyers over those at the top end of the market”.

Richard Donnell, executive director of Zoopla said: “We expect a stronger-than-usual rebound in activity in (the first quarter of) 2026 as a result of a big drop in activity in the run-up to the November Budget when many buyers delayed home buying decisions.”

He said the base rate cut in December “would boost market sentiment going into the new year, which will also support increased levels of market activity – this will support the demand to move home and overall sales volumes rather than leading to an increase in house prices”.

Mr Donnell predicted: “First-time buyers will remain the driving force for the market and are set to account for two in five home purchases.”

He predicted that a “North-South divide” in house price growth will remain in 2026, “reflecting the affordability of homes”.

House price growth in some parts of northern England has been outperforming parts of London and some southern regions, where house prices are often significantly higher.

Mr Donnell said: “Homeowners looking to move in 2026 need to understand the value of their home before making an offer on a new home, which is most important in southern England.”

Looking at transactions, UK Finance has said that it expects around 1.20 million house sales to take place in 2026 and 2027, down from 1.21 million in 2025.

But UK Finance has said that even with “welcome tweaks” made to lending regulations in 2025, affordability is very tight and could limit borrowing options for potential buyers in 2026.

The Financial Conduct Authority (FCA) has set out plans to take a further look into how mortgage access can be improved, potentially helping groups such as first-time buyers and self-employed people.

Amanda Bryden, head of Halifax Mortgages, said:”Looking ahead to 2026, we expect house prices to rise modestly, by somewhere between 1% to 3%.

“While wage growth is expected to slow and unemployment may edge higher, lower interest rates and easing inflation should help to gradually improve home buyers’ purchasing power.”

Robert Gardner, Nationwide Building Society’s chief economist, said that in 2025: “Annual house price growth in Northern Ireland outpaced the rest of the UK by a wide margin, averaging 11% in the first nine months of the year, almost four times faster than the 3% recorded in the UK as a whole and more than double the 5.1% recorded in the next strongest performing region (the North of England).”

He added: “Wales broadly matched the wider UK trend in 2025, while Scotland saw a marginally stronger rate of house price growth.

“London was the weakest performing region in the first nine months of the year with annual growth averaging 1.3%.

“This was part of a wider trend that saw house price growth in the northern regions of England outpacing the southern regions.”

Looking to the year ahead, Mr Gardner said: “We expect annual house price growth to remain broadly in the two to 4% range.”

In the Budget, the Government announced a high value council tax surcharge in England on homes above £2 million from April 2028.

Mr Gardner added: “The high value council tax surcharge is not being introduced until April 2028 and will apply to less than 1% of properties in England and around 3% in London.”

Lucian Cook, head of residential research at Savills, said: “Our mainstream house price forecast expects average house prices to increase by 2% in 2026 or £7,200, in what is expected to be a bottom-up rather than a top-down recovery, given some of the challenges at the top end of the market.”

Mr Cook added: “More affordable late-cycle markets in the North, Scotland and Wales are expected to continue to perform most strongly, while price growth in London and the South is likely to remain more subdued, due to greater affordability challenges.”

With the top end of the housing market expected to remain price sensitive in 2026, Mr Cook said that “pragmatism will remain key to achieving successful prime sales in 2026, creating opportunities for well-informed, realistic buyers and sellers”.

Nick Leeming, chairman of Jackson-Stops, said the seasonal “spring bounce” usually seen in the housing market “should be more pronounced than the long-term norm”.

He said: “Following almost six years of exceptional volatility driven by Covid, fiscal shocks and political uncertainty, 2026 is now expected to mark a return to a more stable and recognisable housing market.”

As housing market activity ramps up in 2026, home buyers are being reminded to be mindful of the quality of the property they choose.

Emma Toms, chief executive of the New Homes Quality Board, said: “Any suggestion of home buyers re-entering the market in 2026 will come as welcome news to the construction sector and the wider economy.

“But periods of heightened demand can put pressure on developers to build quickly. So, if we want to ease the housing crisis and ensure the uptake of new-build homes is strong, we absolutely must ensure that quantity never comes at the expense of quality or customer care.

“Through our industry code and oversight of the New Homes Ombudsman Service, we set clear rules for housebuilders, drive improvements in behaviour, and provide buyers with a route to redress if the standards set out in the code are not met.”