BLOGS

A tale of two markets

The UK housing market in 2026 increasingly resembles two distinct economies operating under the same roof. While headline figures from HM Land Registry show modest national growth of 1.2% annually to February 2026, this average obscures a widening regional divide that is reshaping investment strategies and confounding earlier forecasts.

Northern Ireland continues to lead the UK with a striking 7.5% annual rise, pushing average prices to £196,000 in Q4 2025. Scotland follows with 2.3% growth to £187,000, while Wales has recorded a 2.5% increase to £210,000. These devolved nations and more affordable English regions are benefiting from stronger relative affordability and a healthier balance between supply and demand.

The picture looks very different in southern England. REalyse transaction data reveals that London has experienced a 6.52% year-on-year price decline, with average sold prices now sitting at around £601,000. The South East, South West and East of England have all recorded falls of more than 2% over the same period.

Why forecasters are turning cautious

At the start of 2026, the consensus view among major forecasters was for steady, if unspectacular, price growth. Nationwide predicted 2–4% gains, Halifax suggested 1–3%, and both Savills and Rightmove pointed to around 2% national growth. That optimism has since been tempered.

Savills revised its 2025 full-year forecast from 4% down to just 1%, describing the market as one of "consolidation rather than strong growth". Rightmove made a similar adjustment, lowering its 2025 prediction from 4% to 2%. For 2026, most forecasters now cluster around the 1.5–2.5% range, with Pantheon Macroeconomics among the more bearish at 1% following geopolitical pressures on inflation and borrowing costs.

Several factors underpin this caution. Sales volumes remain well below the pre-pandemic norm of 1.2 million transactions per year, with projections for 2026 hovering around 1.04–1.15 million. High levels of unsold stock have created a buyer's market, particularly in the South. And while mortgage rates have improved from their 2024 peaks—the average two-year fixed rate stood at 4.29% in January 2026, down from 5.03% a year earlier—recent volatility linked to Middle East tensions pushed rates back above 5% in March, dampening momentum.

Regional outperformers and the affordability equation

The resilience of Northern Ireland, Scotland and Wales reflects a straightforward affordability advantage. Average prices in these markets remain significantly below England's £290,000 average, let alone London's £601,000. First-time buyers have been particularly active in these regions, supported by falling mortgage rates and wage growth that continues to outpace house price inflation.

REalyse data highlights the contrast in transactional activity. While London recorded 87,438 sales over the past 12 months and the South East saw 113,711, Scotland delivered 34,168 transactions and Wales 12,451—smaller markets, but ones where price growth has remained positive.

Estate agents and surveyors echo this divergence. The latest RICS survey shows surveyors in London at -40% on price expectations, compared with positive readings in Northern Ireland, Scotland and the North West. Rightmove's property expert Colleen Babcock has noted that 2026 "will feel very different depending on location and price bracket", with conditions favouring first-time buyers in more affordable regions over high-value home movers in the South.

What lies ahead for the rest of 2026

The outlook for the second half of 2026 hinges on three variables: the path of interest rates, the trajectory of inflation, and the depth of geopolitical uncertainty. Most economists still expect further Bank of England rate cuts later in the year, which would support affordability and transaction volumes. However, the recent spike in mortgage rates following Middle East tensions demonstrates how quickly conditions can shift.

For investors, developers and lenders, the message is clear: national averages no longer tell the full story. Granular, location-specific analysis has become essential for accurate valuations, site appraisals and portfolio monitoring. REalyse data shows meaningful variation not just between regions but within them—at postcode district level, performance can diverge sharply from headline figures.

The two-speed market also presents opportunities. More affordable regions with positive price momentum may offer better risk-adjusted returns, while high-value southern markets could reward patient buyers willing to negotiate in a buyer-friendly environment.

Conclusion

The UK housing market in 2026 defies simple characterisation. Strong gains in Northern Ireland and Scotland sit alongside falling prices in London and the South East, while national forecasts have been steadily downgraded despite improving mortgage rates. For property professionals navigating this landscape, evidence-based, local analysis is more important than ever. National headlines tell only part of the story—and often the least useful part.