London’s housing market goes into 2026 with cautious optimism. Activity picked up at the start of the year as mortgage pricing improved and some of the “wait-and-see” uncertainty around policy and tax changes faded.
That said, most forecasters still expect London to underperform many other UK regions in 2026, largely because affordability is tighter and the market has a higher proportion of flats (which have been slower to recover).
1) The headline forecast: modest (or flat) price growth
A sensible “base case” for 2026 is low single-digit growth nationally, with London flatter than average:
- Savills’ mainstream forecast (second-hand, average values) has London at 0.0% growth in 2026 (with a gradual recovery thereafter).
- Nationwide’s UK outlook expects 2% to 4% UK growth in 2026 (national figure, not London-specific).
- Halifax’s UK outlook flags a modest 1% to 3% rise (again, national).
- Rightmove forecasts around 2% growth in asking prices across the UK, and specifically notes London is likely to lag.
What that means in practice: for many London sub-markets, 2026 is more likely to be a “stability and selective opportunities” year than a broad-based boom—especially once you factor in negotiation, incentives, and realistic pricing.
2) London won’t move as one market in 2026
London performance tends to split by price point, property type and location:
Outer London and “value” pockets may do better than prime areas
Zoopla’s 2026 postcode ranking places London at the bottom overall for price-growth prospects, but still shows some outer-London / fringe postcodes performing better than inner, higher-value areas.
Flats vs houses: the gap is still a factor
Flats have been more sensitive to service charges, building-safety issues and buyer caution, which can hold back headline London averages even when family houses remain resilient. (This is one reason many forecasts expect London to lag.)
Prime Central London: softer sentiment can persist
At the top end, policy and tax sentiment still matters more, and there’s been recent commentary on higher-value market headwinds and “market adjustment” dynamics in London land pricing.
3) The interest-rate story is still the biggest lever
Mortgage affordability is the engine room of 2026 demand.
- The Bank of England reduced Bank Rate to 3.75% in December 2025, with the next decision due 5 February 2026.
- Forecasters and market commentary link early-2026 momentum to improving affordability and easing mortgage rates, though the path of cuts (and lenders’ pricing) remains key.
The “watch out” factor: a large cohort of households will refinance this year, and that can affect confidence and forced-sale risk in some pockets if rates don’t fall as quickly as expected.
4) Transactions and negotiation: expect a “buyer’s market” feel in many areas
Even if prices hold steady, market mechanics can still favour buyers:
- Survey evidence at the end of 2025 suggested demand and sales activity were subdued, but with improving expectations for the year ahead—often consistent with a market that is functioning, but price-sensitive.
- Higher available stock in some areas can limit price spikes and increase the scope for negotiation (especially where listings are competing).
Likely 2026 pattern: sellers who price sharply and present well can still achieve strong results, but “overpriced and optimistic” listings may sit, take reductions, or sell only after incentives.
5) London rents in 2026: slower inflation, but supply pressures remain
Rents matter because they shape investment demand and household decision-making.
- ONS data shows London had the lowest annual private rent inflation in England in the year to December 2025 (a sign the extreme rental inflation phase has cooled).
- At the same time, multiple sources expect rental supply constraints to remain a theme, particularly with policy changes affecting landlords. For example, Savills flagged that changes in landlord economics and the planned end of Section 21 (noted as coming into effect 1 May 2026 in their update) can influence stock levels and future rent pressure.
Practical takeaway: don’t assume “low rent inflation” equals “easy renting.” In many neighbourhoods, good-quality, sensibly priced homes can still see strong competition.
6) Key risks and “things to watch” through 2026
If you’re buying, selling, investing or refinancing in London this year, keep an eye on:
- Bank Rate decisions and mortgage pricing (the monthly changes matter more than the headline annual forecast).
- Policy and tax direction around higher-value homes and landlords (sentiment can impact the top end disproportionately).
- Local supply: planning and delivery constraints can support values long-term, but short-term listing volumes can cap growth in certain postcodes.
- Property-specific costs (service charges, major works, building safety remediation) which can materially affect flat values and negotiation outcomes.
What this means for you in 2026
Buyers: 2026 can reward patience and due diligence. If the price growth is flat, the value often comes from buying the right property, on the right terms, with clear visibility on condition and running costs.
Sellers: realistic pricing plus strong presentation is crucial. Many buyers are cost-conscious and will challenge anything that looks like future expenditure (roof, damp, services, structural movement, windows, cladding-related costs).
Landlords/investors: focus on net yields after compliance and tax, and plan for longer lead-times on regulatory and building-safety matters.
Speak to us
If you’d like property-specific advice—whether you’re buying, selling, planning works, or dealing with condition concerns—get in touch.
Email: mail@howorth.uk
Call: 07794 400 212