Housing Market Starts Year Strongly After Uncertainty in 2025

Stuart Clark
Feb 6
2 min read

The UK property market has entered 2026 on a firmer footing, shaking off the hesitation seen toward the end of last year. Supported by easing mortgage rates, strengthening buyer affordability, and renewed consumer confidence, the sector is showing signs of steady momentum—positive news for homebuyers, sellers, and investors alike.

According to new data from major lenders, average UK house prices recorded moderate monthly and annual growth, signaling a more stable environment than many anticipated heading into the year.

A Promising Start: Prices Edge Upward

Recent figures show that property prices rose by around 0.3% in January, with annual growth strengthening to 1%—a notable shift from the slower pace recorded at the end of 2025.

This uptick reflects improving market sentiment after months of uncertainty surrounding potential tax changes and an unusually subdued final quarter. Despite this, mortgage approvals remained close to pre‑pandemic levels, demonstrating that underlying demand held firm throughout the turbulence.

Affordability on the Rise

One of the strongest drivers behind the renewed confidence is the continued improvement in affordability. Wage growth has been consistently outpacing house price inflation, while mortgage costs have eased across much of the lending market. Analysts note that for a typical first‑time buyer with a 20% deposit, monthly repayments now represent roughly 32% of net income, compared with 38% in 2023—a significant improvement and aligned closely with long-term norms.

This shift has had meaningful effects across the regions. Most parts of the UK have seen affordability strengthen, with London showing the most significant improvement for the second consecutive year thanks to slower price growth and better wage conditions. Northern Ireland, however, stands out as an exception, with affordability tightening as a result of particularly strong price increases.

Market Confidence Rebuilding

Property professionals across the country report an encouraging start to the year, highlighting increased buyer activity and a more realistic approach to pricing among sellers. With more competitive mortgage products appearing and the prospect of further rate reductions later in the year, confidence is gradually returning after months of caution tied to Budget‑related uncertainty. Experts suggest that while this is not a runaway market, it is far healthier than at this time last year.

Industry voices also emphasise that the stabilising conditions are helping transactions progress more smoothly. As inventory levels rise in certain regions, the potential for balanced price growth throughout 2026 becomes more likely—preventing the sharp surges witnessed during the post‑pandemic boom.

What’s Next for the UK Market?

All eyes are now on the next Bank of England rate announcement. While a rate cut is unlikely in the immediate term due to a slight increase in inflation at the end of 2025, the overall trajectory points toward a more favourable lending environment later in the year. Analysts believe this will support continued recovery in both activity and pricing as 2026 unfolds.

For investors—particularly those exploring off‑plan and early‑stage developments—these conditions offer a compelling landscape. Strengthening affordability, consistent demand from first‑time buyers, and stabilising borrowing costs form a supportive foundation for medium‑ to long‑term growth across both city and regional markets.