As 2025 draws to a close, industry experts are already looking ahead to the housing market’s prospects for the coming year. According to a recent forecast from lender Nationwide, UK house prices are expected to rise between 2% and 4% in 2026.
Nationwide’s chief economist, Robert Gardner, attributes this anticipated growth to a combination of factors, including lower borrowing costs and gradual improvements in affordability. “Looking ahead, we expect housing market activity to strengthen a little further as affordability improves gradually (as it has been in recent quarters) via income growth outpacing house price growth and a further modest decline in interest rates,” he explained.
The potential interest rate cut, which could come as early as this Thursday when the Bank of England is widely expected to lower its key rate from 4% to 3.75%, is expected to provide a further boost to the market. However, Gardner noted that recent tax changes announced in the Budget, such as the high-value council tax surcharge and increased taxes on rental income, are unlikely to have a significant impact on prices in 2026.
“The changes to property taxes announced in the Budget are unlikely to have a significant impact on the market,” Gardner said. “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. The increase in taxes on income from properties may dampen buy-to-let activity further and hold down the supply of new rental properties coming onto the market, which could in turn maintain some upward pressure on private rental growth.”
Looking back on the past year, Gardner highlighted that annual price growth has slowed steadily, from 4.7% at the end of 2024 to 2.1% in the middle of 2025 and 1.8% in November. This has left prices close to the all-time high recorded in the summer of 2022.
As the housing market continues to evolve, industry experts will be closely monitoring the impact of these factors on the UK’s property landscape in the year ahead.
