If you’re a landlord trying to plan ahead for 2026, the outlook for the UK housing and rental market probably appears quite mixed. We look beyond the headlines to explore market forecasts for the coming year.
House prices in 2026: slow and steady, especially in London
Estate agency Hamptons expects average prices across Great Britain to rise by about 2.5% next year and by just over 8% by 2028. London is the outlier. Its average property price is only forecast to grow by around 0.5% in total over the same four year period, with homes worth £2 million or more predicted to fall by about 5%.
There are a few reasons behind that drag. The new mansion tax, officially the High Value Council Tax Surcharge due in 2028 for properties above £2 million, adds a recurring cost on top of already high running bills. On top of that come higher stamp duty rates for additional properties, the abolishment of the “Non Dom” tax status regime along with the end of temporary stamp duty discounts.
Hamptons also notes that 14% of London sellers in 2025 sold at a loss, compared with just 6% in 2016, which tells you how stretched affordability has become. Meanwhile, forecasts suggest a clear north south gap. By 2028, prices are expected to rise by about 16.4% in the North East and 13.6% in Scotland, with growth of around 10 to 12% in parts of the Midlands and Wales.
For 2026 specifically, that translates into a relatively flat London market with only small gains at best, while many regional markets see slightly stronger growth from a lower starting point.
Why transactions and sentiment still feel subdued
It is not just tax changes. Mortgage costs remain higher than in the ultra cheap Covid years, and around 600,000 borrowers are due to roll off low fixed rates in 2026 and 2027. That will keep some would-be movers on the sidelines, even if interest rates ease gently.
Analysts reckon that transaction numbers will stay nearly a fifth below pre financial crisis norms. Higher stamp duty, tighter lending rules and political uncertainty mean people move less often and only for bigger, more long term changes. For landlords, that can mean fewer forced sellers but also fewer easy bargains.
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2026 UK rental market outlook: growth, but not a frenzy
On the rental side, research from Savills suggests that UK rents are set to grow by about 12% over the next five years, with London rents expected to rise by roughly 11.5% over the same period. Income growth is forecast at around 15.3%, so in broad terms earnings should outpace rent rises over time.
That would be a marked change from the recent past. At one point in 2022, annual rental growth peaked at around 12%, and by 2025 the average renter was spending about 32.4% of gross household income on rent, up from just over 30% five years earlier. Affordability had its worst squeeze since at least the mid 2000s.
Savills expects the next five years to look more “normal” again. As demand cools and more first time buyers are able to leave the private rented sector, rent increases are expected to sit between inflation and income growth rather than racing ahead of both.
The main risk to that calm scenario is regulation and supply. The Renters Rights Act and ongoing tax changes continue to weigh on smaller buy to let landlords. If too many exit and replacement supply does not come through, rental pressure could flare up again even with softer demand.
What this 2026 forecast means for landlords
Put those pieces together and 2026 looks like a year when capital values may be fairly subdued, particularly in London, while rents carry on rising at a steadier pace. That combination can support yields in some regions, especially away from the most heavily taxed parts of the capital.
At the same time, landlords still face higher borrowing costs than a few years ago, sharper compliance demands and, for some, the prospect of future mansion tax bills. It underlines the importance of stress testing portfolios for higher costs, planning for voids and maintaining appropriate insurance cover for properties and liability.
There is no crystal ball for 2026, but the numbers suggest a more predictable, slower moving market. Careful planning matters and it may help landlords to find healthy returns in a regional hotspot. The days of London based landlords relying on impressive house price growth in the capital certainly appear to be on hold.
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