The RICS Housing Market Survey has shown fragile buyer sentiment for several months. This lead indicator has readily reflected a weakened economic outlook, delay in prospective Bank base rate cuts and rise in political uncertainty at both a global and domestic level.
While other metrics have seemingly been less responsive, the weakness in the 2026 housing market has now started to feed through into a number of other headline statistics.
Annual house price growth came in at a reduced +1.7% in May, with the first monthly house price fall of 2026 showing in the month, according to the Nationwide house price index. Meanwhile mortgage approvals stood at 65,945, in April, according to the Bank of England, as borrowers looked to secure the best rate available in the market.
Earlier this week, we revised our house price forecasts to reflect this. In the mainstream housing market, we are forecasting that prices will fall by -2.0% this year, bringing down our five-year forecast to 18.5% at a national level. You can read more on the thinking behind this and how we expect it to play out at a regional level in our latest update.
Data from TwentyCI gives a useful up-to-the-minute snapshot of market activity. It also suggests activity levels were down in May, despite a little more stability in the mortgage markets; having held up well in previous months.
Overall activity (measured as agreed sales less fall throughs) was -7% down in May 2026 compared to last year.
In the market over £1m it was similarly down by -8%. Accordingly, the number of people having to adjust their asking price to generate renewed interest in their property has continued to remain high.
As Frances McDonald discusses in her latest update, the top end of the market is slightly less exposed to the interest rate environment, but more exposed to political uncertainty than the mainstream. And so, despite the value already on offer, we are forecasting prices of prime property will also soften slightly over the course of the year, with a recovery pushed out until 2028.
Taxation has been at the heart of caution in this part of the market for almost a year now. In this respect, the Treasury has now released a consultation document of how the High Value Council Tax Surcharge should operate across England.
Whatever the drawbacks or merits of that proposal, it does weaken the case for a more widespread review of residential property taxation.
We expect to see modest rental growth continuing to be supported by a lack of rental supply as the Renters’ Rights Act beds in. The HomeLet Index put mainstream rental growth at +2.5% in May, despite the prospect of further pressure on household finances from the underlying rate of inflation.
With the increased security of tenure afforded to tenants and a more formulaic rent review procedure, we expect these indices to assume greater importance in the future, as landlords use more data to justify rent increases.
Meanwhile, the ban on bidding wars is expected to result in a one-off increase in asking rents, in order to allow the true market rent to be established through a degree of appropriate competition.
Revised Mainstream House Price Forecasts
House prices likely to fall in 2026 as higher mortgage rates reduce demand.
Revised Prime House Price Forecasts
Changing market conditions lead to a more cautious short term outlook for prime housing markets.
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