The UK property market has entered 2026 with a noticeable shift in tone from the final months of last year. While December was predictably quiet in terms of transactions, January has seen an early bounce in market activity. This is being driven by a combination of renewed seller confidence, easing inflation, and a clearer backdrop following the Autumn Budget.
Sales Market: Listings Remain High
According to the latest Rightmove House Price Index, the UK housing market has started 2026 with a notable rise in asking prices, albeit against a backdrop of high stock levels and lingering caution. In January, average asking prices for homes coming to market increased to £368,031, representing a 2.8% rise from December 2025 - the largest month?on?month jump for this time of year on record. Despite this price gain, overall listings remain high for January, giving buyers more choice than is typical in the post?holiday period.
Tip for Buyers: With more choice on the market, it’s worth shortlisting homes and booking viewings early in the year before competition picks up.
This rise follows a period in late 2025 when asking prices slipped and buyer confidence was dampened by prolonged uncertainty ahead of the November Budget, which weighed on market activity and prompted more price reductions across the UK. In fact, Rightmove data from November 2025 showed that average new seller asking prices were £364,833, down 1.8% month?on?month, with a significant proportion of listings having had their prices cut.
Together these trends paint a picture of a market where renewed seller confidence is emerging in early 2026, however, there is greater choice and more realistic pricing.
Tip for Sellers: Present your home well, price it fairly, and respond quickly to interest. Little things make a difference - declutter, fix minor issues, and consider a fresh coat of paint before launching to market.
On the demand side, buyer activity is picking up - but with caution. Many buyers are taking longer to commit and negotiating more strongly. Zoopla reports that housing supply is at its highest level in eight years. However, buyer demand is lagging a little - down on this time last year.
Tip for Sellers: Use the New Year momentum to your advantage. A tidy-up and fresh listing early in the year can catch those ready-to-move buyers.
A key driver of buyer hesitation is mortgage affordability. The Bank of England’s Credit Conditions Survey suggests lenders expect lower mortgage demand in early 2026. Even though interest rates have stabilised, high monthly repayments, particularly for those remortgaging, are still dampening affordability.
Tip for Buyers: If you're feeling the squeeze on affordability, speak to a mortgage broker. Some fixed deals are more flexible than they look.
At the same time, inflation has eased. Wage growth is gradually improving purchasing power, which should support moderate price growth this year. Most industry forecasts expect UK house prices to rise between 2% and 4% during 2026 - helped by stronger consumer confidence, improving supply, and stabilised lending rates.
January 2026 presents a cautiously optimistic picture. There is more choice for buyers, more confidence among sellers, and stable conditions to support gradual price growth. However, pricing remains key. Sellers who set realistic expectations and prepare their homes well will attract the most interest.
Lettings Market: High Demand, Low Supply
The lettings market has started the year in much the same way it ended 2025 - with high tenant demand and ongoing pressure on available stock. According to the latest ONS figures, private rents rose by 4.4% in the 12 months to November 2025. While this marks a slight cooling compared to earlier peaks, the pace of growth remains significant.
Supply remains constrained. With the Renters’ Rights Act now coming into effect, many landlords are reassessing their positions. Industry reports suggest a portion of small portfolio landlords are choosing to exit the sector due to tightening legislation and increased compliance costs. As a result, fewer rental homes are coming to market in early 2026, adding to competition among tenants.
Tip for landlords: Keep communication open with tenants and invest in small upgrades - warm homes and good EPCs go a long way in tenant retention. A small investment in insulation or smart heating can make your property stand out and attract long-term tenants.
Average rents in England now sit at approximately £1,403 per month, with London far higher at over £2,250. Scotland and Wales are averaging £1,002 and £811 respectively, according to the ONS. These figures highlight the affordability challenges faced by renters, particularly those relocating or moving for work.
Tip for tenants: Be ready to move quickly. Have your references and deposit paperwork ready before you start viewing.
For landlords staying in the market, well-maintained, energy-efficient properties are commanding premium interest and achieving longer-term lets.
The outlook for Q1 suggests rents will continue to climb steadily, especially in areas with a limited pipeline of new rental listings, and tenant demand remains strong.
Looking to Buy, Sell, Let or Rent this year?
City Realtor is here to support your next move in Tower Hamlets. Call 0207 790 7702 or email admin@cityrealtor.co.uk to speak with our team.
Note: The information in this article is based on data as of November & December2025 / January 2026 and may change. Always seek professional advice for specific circumstances.
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