House prices are expected to see modest growth in early 2026 as sales activity returns to pre-pandemic levels according to Mish Liyanage, founder and chief executive of the Mistoria Group.
Liyanage (main picture), who has two decades of experience sourcing and letting properties, expects the market to stabilise after several years of volatility.
A recent study puts the average UK house price at £280,000, with projections suggesting it could exceed £300,000 by the end of next year – an estimated rise of between 1- and 4%. The company says this would offer a lift to long-term homeowners seeking incremental gains in property values.
Forecasts for Bank of England interest rate cuts in 2026 are also expected to support confidence, particularly as the ratio of house prices to consumer income has fallen to its lowest level since 2015. Analysts say this could encourage activity in the opening quarter of the year.
BUDGET IMPACT
However, Liyanage cautioned that homes remain far less affordable than in previous decades and said the full effects of the chancellor Rachel Reeves’s Autumn Budget will only become clear from April.
The housing market slowed in the run-up to the Budget amid concerns about policies that could depress returns.
From April 2026, landlords will pay more tax on rental income, though private homeowners avoided significant changes, with the “mansion tax” affecting fewer than 1% of properties.
Other measures could weigh indirectly on sentiment. While the minimum wage has risen, fiscal drag will push more workers into higher tax bands, squeezing disposable income.
Early-career professionals are expected to be among the hardest hit and may find home ownership slipping further out of reach.
IMPROVED AFFORDABILITY
Mortgage costs remain a key factor for buyers. Rates surged in the aftermath of the 2022 mini-budget and, although the Bank of England last cut rates in August, they remain around 4% – well above the 2% levels typical a decade ago.
Economists expect reductions next year, which could lower borrowing costs and improve affordability.
Regionally, the North West is expected to outperform the wider market in 2026.
Demand is strengthening in Manchester and Liverpool, supported by improved transport links and job creation, with property values in the region forecast to rise more quickly than in southern England.
