Are UK house prices about to crash?

It is a mixed bag for the UK housing market – property prices have started to crawl upwards again, but cautiousness remains.

The average house price in the UK is now £298,184, according to the latest data from Halifax, falling by 0.3% in the year to September. It means overall house price growth has slowed, with prices rising by 1.3% – the slowest rate of annual price growth since April 2024.

But the outlook overall “remains mixed”, said MoneyWeek. Data suggests the market has “remained broadly stagnant” recently and with the Autumn Budget on the horizon, there could be more pain for homeowners.

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What’s happened to house prices?

While many were hopeful that momentum in the property market would snowball, a “post-summer bounce in activity” has not materialised, said The Guardian.

Figures from Rightmove have shown “growing caution among house hunters”, with a drop in both new buyers contacting estate agents and in new sellers coming to market.

Some of “the most iconic neighbourhoods” across the country have seen their house prices drop substantially, said This is Money. The “price stuttering” was most pronounced in London, with areas such as Somers Town, Camden, Borough and Abbey Road suffering price drops of nearly 50% since 2019.

The fall has been attributed in part to the chancellor’s “tax crackdown” on second homes and non-doms, who have their primary home outside of the UK for tax purposes, as well as “hikes in interest rates”.

In the south of England, “where property prices tend to be highest”, growth “continues to cool”, said Forbes. Prices in the Southwest fell by 0.2% in the year to September, and “budget fears” are heightening. With Rachel Reeves’ intentions still unclear, the speculation is “having a dampening effect” on market activity, said Alice Haine, personal finance analyst at Bestinvest.

What could cause a price crash?

The performance of the market over the summer “may well be a sign that prices are starting to decline significantly”, said Matthew Lynn at MoneyWeek.

The stagnating economy means “there are fewer people with money to spend on a new home”. Second-home owners are also “quitting”, adding huge amounts of extra supply. At the same time, “taxes and green levies are still increasing”, meaning people who had planned to upscale may not be able to afford to, which will “choke off demand”.

With the housing market already “at a low ebb” and “millions of heavily indebted households” about to “come” off cheap fixed-rate loans taken out when borrowing costs were at rock-bottom”, said The Telegraph earlier this year, the wheels of a “slow-motion car crash” are already turning, and “Britain’s homeowners are heading towards a cliff edge”.

So what will happen to the price of your house?

Predictions on house prices have been “far more bullish than a year ago”, said Which?, and there is a “consensus” that house prices will rise in the coming year.

Savills, for example, has forecast growth of 4% in 2026, while Halifax estimates an increase of up to 3%. Some have been more cautious, with Zoopla forecasting “slight growth” of 1%, while Rightmove “downgraded” an initial estimate of 4% to 2%.

The longer-term outlook is less certain and likely to vary from region to region, especially as the government pushes lenders to loosen affordability rules, and analysts weigh up the possibility of another rate cut by the Bank of England this year.

In the present, the “full-scale slowdown” has perhaps been most evident in “swathes of the rural property market”, said The Times. It’s bad news for country home owners who have seen the market “wrecked” by a “toxic combination of factors” including capital gains tax, stamp duty rises for second home owners and increases in council tax for second homes.

Price drops have created more of a “buyers’ market” and those looking to sell their home should expect buyers who are “more aggressively negotiating” on price point, said Coutts. While nothing about the Budget is “set in stone”, homeowners may be buoyed by the notion that “life events, not fiscal policy” often drive “many transactions”.

Although hesitancy remains due to the looming Budget, “moving home typically takes six to seven months”, said Zoopla. “Waiting for certainty”, then, would be a mistake for “serious buyers” as it could mean “missing out on opportunities”.