Our latest prime forecasts point to a year of greater stability in 2026, followed by a gradual but sustained recovery across the prime residential markets over the next five years.
Now that the long anticipated Budget is out of the way and there is more certainty surrounding the property tax environment, our thoughts have turned to what’s in store for the prime central London market in 2026.
The new High Value Council Tax Surcharge is unlikely to have much of a direct impact on these markets, given the relatively low charges. To some extent, the impact of these most recent changes has already been absorbed by the market, with values falling by -4.8% in 2025, -3.2% of which took place in the six months to September.
There are early signs that activity is beginning to pick up, providing evidence that some buyers are taking advantage of more certainty and where values sit. But in an environment of heightened geopolitical uncertainty, we might have expected stronger safe haven flows. The weakness of these reflects the compound effect of a myriad of tax and regulatory changes throughout the past 11 years on buyer sentiment.
This leaves prices 24.5% below their 2014 peak in nominal terms, translating to a 50% adjustment on an inflation adjusted basis and a 41% discount for a US$ buyer.
And so while global wealth continues to rise (with wealth creation in Asia-Pacific growing the fastest of all regions, according to UBS), it remains reluctant to find a home in London, in the current environment. That, combined with headlines of high profile non-doms moving their residency elsewhere around the world, suggests there is little to support a return to price growth this year.
But we are only forecasting modest price falls for 2026 as a whole. This is an improvement on last year, given greater stability and the ability for buyers and sellers to plan ahead now that they know what they’re in for.
Beyond 2026
Looking further ahead, the same tax and regulatory changes mean we are forecasting a gradual recovery, as opposed to a significant bounce, in values. We expect prices to return to where they were in mid-2022 by the end of 2030, on a nominal basis.
Stable inflation, lower interest rates and continued global wealth generation all support this, as does London’s undeniable cultural, lifestyle and educational offering. But a stronger recovery relies on a more welcoming tax and regulatory environment being created for the world’s wealthy.
Many homeowners and potential buyers across the more domestic parts of prime London will have breathed a sigh of relief after last year’s budget. This fed through to improved activity and more stable pricing, with values remaining broadly flat in the final quarter and falling by a modest -1.3% during 2025.
House values have held up better than flats and this is likely to continue in the short term, particularly because of more subdued demand from buy-to-let investors.
Overall, the performance of these markets will still be influenced by the cost and availability of mortgage debt. And while Bank base rate is expected to continue to fall during 2026, this has largely been priced into mortgage markets already.
Continued pressure on prices in central London will also mean a lack of trickle down growth that is typically expected during the early part of a recovery.
As a result, we are not forecasting any further price falls across outer prime London this year but capacity for growth also remains limited and so prices are likely to remain broadly flat.
Beyond 2026, stable inflation, the expectation that interest rates will continue to fall and rising GDP levels mean there is more capacity for house price growth in the latter part of the five year period.
Prime regional markets have also been supported by falling mortgage costs and improved sentiment following November’s Budget. Prices fell by only -0.6% over the last three months of the year, leaving them down by -3.9% on an annual basis.
We expect this improvement to continue in 2026 with price growth returning, albeit at a modest pace.
Thinking further ahead, the new High Value Council Tax Surcharge could lead to more downsizing and, in some cases, heavily mortgaged owners of high value homes to move to a less valuable property. This could push some demand from London into the suburbs and commuter zone and some more movement within these areas.
But ultimately we don’t expect to see a rush of stock coming to the market because of the likelihood that owners will be able to defer any charges until sale or death.
More locally, last year’s increase to the stamp duty surcharge continues to weigh on second home hotspots. But encouraging signs at the end of last year and so far in 2026, together with the price falls we’ve already seen, means recovery is also likely to feed through to these markets.
The lower value markets of the Midlands and North of England and Wales, where affordability is less of an issue, are likely to continue outperforming both this year and during the five years to 2030.
Scotland was the strongest performing prime market throughout 2025 and this is expected to continue. Following the country’s January Budget, and the announcement of two new council tax bands above £1 million, we expect to see a short term uplift in market activity, particularly given the two year breathing space before implementation. Buyers will also be relieved that Land and Buildings Transaction Tax rates will remain unchanged in the coming tax year.
Overall, we are expecting more stability for both activity and prime prices this year, with buyers and sellers able to plan now that they have more certainty.