House prices have been under pressure for most of the year and there is little light at the end of the tunnel for homeowners who may want to sell their property any time soon.
Average house prices in England are now lower in real terms than 20 years ago, said the Daily Telegraph as inflation and interest rates “hammer the property market”.
The housing market is getting hit by a range of factors with mortgage rates on the rise, a “glut” of supply and fears of interest rate rises amid geopolitical tensions, said MoneyWeek. This has led some estate agents to proclaim we are “firmly in a buyers’ market”.
The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
SUBSCRIBE & SAVE
Sign up for The Week's Free Newsletters
Join more than 350,000 subscribers and keep yourself informed with a selection of The Week’s most interesting, enlightening and entertaining stories - plus daily puzzles.
Join more than 350,000 subscribers and keep yourself informed with a selection of The Week’s most interesting, enlightening and entertaining stories - plus daily puzzles.
Latest Videos FromThe Week
This is filtering into house prices. Annual growth slowed for the third month in a row to 1.4% as of July 2026, said HM Land Registry, which is blamed on a “sharp slowing” in the south west, London and the West Midlands.
Meanwhile, landlords will have to contend with higher rates of income tax from April 2027 and high-end property owners are facing a new mansion tax from April 2028.
Analysts expect these changes to also have an impact on house price growth.
What’s happened to house prices?
The housing market has faced a “more difficult backdrop in recent months”, said Lloyds, due to the impact of global events on inflation and borrowing costs, which has created greater economic uncertainty.
The latest Lloyds House Price Index shows average property values declined by 0.4% annually during August 2026, the first year-on-year decrease the lender has recorded since November 2023.
Average prices were also down on a monthly basis by 0.2%, putting the typical British house price at £298,468.
Other indices have registered lower levels of growth. The latest figures from Nationwide show average property values were up just 0.2% between July and August 2026, rising by 1.6% annually.
Some commentators believe a housing market crash is inevitable.
A “bubble has formed” in the housing market, said The Critic, and is collapsing “as the wind comes out of the sales of market confidence”. Devaluations “must be swallowed” in parts of the country such as the south east and London where homes have been “overvalued for the past 20 years”.
Not everyone is so pessimistic about property though.
Some parts of the housing market such as London new-build flats have experienced “significant price falls”, said the HomeOwners’ Alliance.
But analysts aren’t expecting a “nationwide UK housing market crash” and instead expect growth to remain “broadly stable or modest”, albeit with regional differences.
How will mansion tax affect property prices?
Former Chancellor Rachel Reeves unveiled plans for a mansion tax in her 2025 Autumn Budget, under a new High Value Council Tax Surcharge on homes worth more than £2 million.
Charges will range from £2,500 per year for eligible properties worth between £2 million and £2.5 million, and rise to £7,500 if your home is worth more than £5 million, with the tax rising by inflation each year.
Work on the tax has continued under new Prime Minister Andy Burnham and chancellor John Healey.
This effectively introduces a “price limit on houses”, said Matthew Lynn in The Spectator and could “distort the market”.
Rightmove property expert Colleen Babcock suggested the tax would “disproportionately affect London and the south of England markets, which are still recovering from April’s stamp duty increase”. While there will always be a market for the highest priced, premium properties in the most popular locations, this tax is more “stifling than supportive of movement and growth” within the market.
Many of the affected owners are likely to be “asset-rich but cash-poor”, said The Times, so expect “plenty of serious appeals around the proposed revaluation exercise”.
What could cause a price crash?
There is no suggestion that house prices will crash, but the Office for Budget Responsibility has forecast that higher property income tax rates from April 2027 will “reduce house price growth by around 0.1 percentage points a year from 2028”.
The basic rate of these property taxes will rise from 20% to 22% from April 2027. The property higher rate will increase from 40% to 42%, and the additional rate from 45% to 47%.
Furthermore, while fewer than 1% of properties in England are expected to be above the £2 million mansion tax threshold, it could have “knock-on effects for the rest of the market” if activity slows at the top, said This is Money.
There could even be further tax changes in Healey’s first Budget in October.
So what will happen to the price of your house?
In the past, severe property market downturns have been associated with rising unemployment, high levels of mortgage arrears, increasing forced sales and an oversupply of properties on the market but, said Gordon Blair Financial Services, “these conditions do not appear to be widespread across the UK”.
Analysts have been altering their house price forecasts though.
Savills previously predicted 4% annual property price growth in 2026 but has since revised its forecasts to a 2% drop.
Economists at Pantheon Macroeconomics previously forecasted UK house prices would rise by 3% this year, but now expect an increase of just 1%.
Meanwhile, Rightmove started the year predicting asking prices would rise by 2% but now expects them to either be flat or to fall by 2% instead.
Meanwhile, the landlord income tax and mansion tax changes don’t come in until 2027 and 2028 respectively, added Rightmove, so movers and homeowners “have time to plan and assess what the changes might mean for them”.
