"Inflation is easing, mortgage rates are falling, and affordability is improving, which should support modest price growth next year. But it's hard to ignore the growing drag of taxation and politics"
- Aneisha Beveridge - Hamptons
House prices are set for modest growth, rising 2.5% across Great Britain in Q4 2026 as inflation cools and interest rates ease, according to the latest data released this morning from Hamptons.
Transaction volumes are forecast to remain steady at 1.15 million in 2026, with affordability improvements offsetting economic and tax headwinds.
However, the estate agency cautions that political risk and higher borrowing costs will weigh on price growth from 2027, with growth slowing to 2.0% in Q4 2027 and 1.5% in Q4 2028.
Prime markets are expected to remain subdued, with tax policy and uncertainty curbing mobility and recovery. In a major shift in the regional house price cycle, the East Midlands is forecast to overtake London in cumulative price growth since 2009 by next year, with the North West and West Midlands following by the end of 2027.
Following the Autumn Budget, Hamptons has updated its housing market outlook to reflect the latest economic and policy changes. While the Budget brought clarity for the mainstream market, demand-side stimulus such as Help to Buy or a stamp duty cut was absent, meaning markets will remain cautious. The Budget introduced targeted measures, including a council tax surcharge on £2m+ homes and higher property income tax for landlords, affecting only a small slice of the market.
2026: Stability returns, but growth remains modest
Inflation is likely to fall faster than anticipated next year, allowing for two or three base rate cuts. Hamptons expects the Bank Rate to settle at around 3.25% by the end of 2026, with typical mortgage rates stabilising at around 4.0%. This should improve the availability of sub-4% mortgage deals, even for borrowers with smaller deposits, helping to support price growth and activity.
Affordability is improving on paper, with earnings growth running ahead of inflation. While some households rolling off shorter fixed-rate deals are seeing lower monthly payments, others are still adjusting to higher costs. Around 600,000 borrowers on ultra-low sub-3% five-year fixes will be rolling off in 2026 and 2027.
Against this backdrop, the research forecasts modest growth, with house prices across Great Britain (based on the ONS House Price Index) rising by 2.5% in Q4 2026. Stronger growth is expected in the Midlands and North, where affordability is less stretched.
Transaction volumes are likely to hold at around 1.15 million, predominantly supported by necessity-driven moves such as growing families and relocations, but will still remain slightly below historic norms. The absence of a stamp duty holiday, traditionally a catalyst for activity, means sentiment will rely more on economic fundamentals.
London and prime markets: A recovery delayed
At this stage in the cycle, the London market would typically be expected to regain momentum. Historically, the capital leads recoveries once affordability improves, but this time the rebound looks muted.
Since 2016, London has consistently underperformed the rest of Great Britain, and Hamptons' forecasts suggest that trend will continue, a reversal of what was previously expected. Flat growth (0.0%) is anticipated across Greater London in 2026 as the market digests recent tax changes. While small price falls are expected in the £1.9m+ segment, this is likely to be offset by growth in the mainstream market, where improving affordability and easing mortgage rates are starting to support buyer confidence.
One growing challenge is the lack of price growth for higher-value homes. Declining prices, particularly in Prime Central London, mean a rising share of households are selling for less than they paid. In 2025, 14% of London sellers sold at a loss, up from 6% in 2016. This disincentivises moves and encourages owners to stay put, especially when faced with the high cost of Stamp Duty Land Tax on their next purchase.
As a result, the London market is increasingly being driven by first-time buyers, who accounted for 50% of homes sold in the capital this year.
The decision to raise Stamp Duty Land Tax earlier this year, combined with wider tax concerns, including changes to non-dom status and speculation around capital gains and inheritance tax, has created a challenging backdrop for high-value markets. The new council tax surcharge on homes worth over £2 million adds another layer of cost, further dampening sentiment and therefore values.
Prime Country markets, where council tax bills are already significantly higher than in London, could come under even greater pressure from this surcharge. These areas saw strong growth post-Covid, but political uncertainty and tax burdens are now prompting many households to delay moving.
Properties above the £2m mark could see around a 5% price correction, but this is expected to be a one-off adjustment rather than a prolonged decline, as markets absorb the change and stabilise. Tax rates remain below European and US equivalents.
2027 to 2028: A higher inflation era and political risk
It looks increasingly likely that 2026 will mark the end of the rate-cut cycle, and the years ahead look more uncertain. Inflation is expected to remain above the 2% target, and mortgage rates could begin to edge higher in 2027 as markets begin to factor in future interest rate increases. Against this backdrop, house price growth across Great Britain is forecast to slow to around 2.0% in Q4 2027 and 1.5% in Q4 2028.
Political uncertainty will become a more prominent driver of sentiment, particularly in prime markets in 2028, the year before the planned election. Tax policy is increasingly acting as a levelling-up mechanism, limiting recovery in higher-value markets in London and the South.
London is forecast to see around 1.0% growth in 2027, before stalling again in 2028. The growing burden of stamp duty and other levies will continue to dampen activity.
In real terms (inflation-adjusted), house prices are likely to continue underperforming, with affordability stretched and uneven earnings growth. While headline wage growth may remain strong, driven in part by fewer entry-level roles, the benefits will not be evenly distributed. This will particularly impact first-time buyers and renters.
Over the four-year forecast period, the North East is set to see the strongest growth (16.4%), followed by Scotland (13.6%) and Yorkshire & The Humber (12.5%). These regions have seen some of the weakest growth since 2010, so this acceleration marks a catch-up phase.
The longer-term cycle: Power shifts to the Midlands
While London has historically been the safe bet for long-term price growth, the picture is changing. Since Q4 2010, when house prices bottomed out, prices in London have risen by 84%, outperforming every other region and the Great Britain average of 74%. However, next year could mark a turning point, with the East Midlands forecast to overtake London in cumulative growth, and the North West and West Midlands following by the end of 2027.
By 2028, prices across Great Britain are expected to have risen by 84% since 2010. The East Midlands will be the top performer over the period (94%), followed by the West Midlands (90%) and the North West (88%). London will fall to fourth place and will be the only region where average prices remain below their 2022 peak. This shift reflects stronger affordability and economic resilience in these regions compared with the capital.
Transactions: Fewer moves, bigger decisions
Transaction volumes are forecast to rise slightly to 1.2 million across Great Britain in 2027, before dipping back to 1.15 million in 2028 as political uncertainty ahead of the 2029 election leads to a pause, particularly in prime markets. Overall, the market is expected to become increasingly sentiment-driven, with volatility around key political events.
At the same time, people are moving less often and making bigger, more "future-proofed" moves when they do. Despite there being 10% more owner-occupied households in England since 2008, transaction numbers remain around 19% below the average level seen in the three years before the 2008 financial crash.
Without today's significant tax barriers, Hamptons estimates that around an extra 100,000 moves would occur each year. If Stamp Duty were eradicated entirely, transaction volumes could regularly surpass 1.4 million annually, similar to the post-pandemic peak in 2021.
"The housing market has always mirrored the mood of the nation," said Aneisha Beveridge, head of research at Hamptons. "While the headlines have been dominated by uncertainty, underneath it all, we've seen signs of resilience."
"Inflation is easing, mortgage rates are falling, and affordability is improving, which should support modest price growth next year. But it's hard to ignore the growing drag of taxation and politics. London, which historically leads recoveries, is being held back by higher stamp duty and broader tax anxieties, locking some owners into their homes and others out of buying them."
"The next phase of the cycle will be shaped less by discretionary moves and more by pragmatism, with policy playing an increasingly central role in determining who moves, when, and where. At the same time, the balance of power is shifting: the Midlands is forecast to have seen more price growth than London since prices bottomed out after the 2008 financial crash."
