The UK housing market is showing signs of recovery after months of sluggish activity, with surveyors reporting a sharp uptick in confidence for both sales and prices. The December survey from the Royal Institution of Chartered Surveyors (RICS) reveals the strongest sales expectations since October 2024. Easing interest rate expectations and cleared budget uncertainty drive the recovery.
A net balance of 22% of professionals now expect sales to increase over the next three months, while 34% anticipate growth over the coming year. Even more striking: 35% of surveyors predict house prices will rise over the next 12 months, marking the most upbeat outlook since late 2024. Analysts expect prices to remain broadly flat in the near term.
The shift comes despite December marking a sixth consecutive month of negative momentum in buyer inquiries. A net balance of 24% of professionals reported falling buyer interest at the end of 2025, while 19% saw declining sales. Yet beneath the surface, sentiment is changing.
New Year optimism meets market reality
The combination of fallen mortgage rates, clarity around taxation following the budget, and the prospect of further rate cuts has sparked stronger-than-normal demand in early January. Tom Bill, head of UK residential research at Knight Frank, said: "The combination of clarity around taxation and the prospect of further rate cuts means demand in the first weeks of January has been stronger than normal. [...] That doesn't mean the market is now on an upwards trajectory and domestic political risks could still undermine sentiment over the next six months."
Bill added that "for now, the absence of bad news means that some of the demand that became pent up last year is being released [...]" Knight Frank forecasts UK prices will grow by 3% this year.
Sarah Coles, head of personal finance at Hargreaves Lansdown, cautioned that the sentiment shift must translate into actual buyer and seller activity. "This is a major change in sentiment, but it remains to be seen whether it will be shared by buyers and sellers in the coming months. [...]" she said. "The fact that mortgage rates have fallen and house prices are rising more slowly than wages should help more buyers wrestling with affordability challenges."
Regional divide deepens
The market picture varies sharply by geography. House prices in December fell sharply in London and the South East, while Scotland and Northern Ireland saw growth. This North-South divide looks set to persist throughout 2026.
David Fell, lead analyst at Hamptons, explained: "[...] Housing markets across the Midlands and North seem set to keep the lion's share of house price growth this year. Meanwhile, early signs suggest that sellers in southern markets are still having a tougher time. [...]" He noted that southern markets will "bear the brunt of the impending mansion tax, and 2026 will see prices here adjust to reflect this new reality."
Rental market remains under pressure
The lettings market continues to face supply constraints as landlords sell up. Bill noted that "tenant demand has been relatively strong in the lettings market following the budget and the clarity it brought. However, supply is still under pressure as more landlords sell up due to the proliferation of red tape and taxes in recent years."
Analysts forecast average rental growth at around 3% over the next 12 months. Coles warned that wage growth may not keep pace: "There is the hope that with rents expected to rise 3%, wages might grow faster, protecting renters. However, given how wage rises have slowed and the number of jobs in the economy has been dropping, there are no guarantees."
Tarrant Parsons, head of market research and analysis at RICS, summed up the cautious optimism: "The UK residential market remains in a prolonged soft patch, with December's survey recording a sixth consecutive month of negative momentum in buyer inquiries. That said, there are tentative signs of a shift in sentiment beneath the surface. [...]" He added: "The key test for 2026 will be whether borrowing costs ease on a sustained basis. If so, this could provide the catalyst needed to drive a recovery in buyer demand."
Some borrowers are coming to the end of shorter, more expensive fixed-rate deals in 2026, though others continue adjusting to higher repayments.
Note: This article was created with Artificial Intelligence (AI).
