Chestertons forecasts that property prices will rise by around 2% across the UK and Greater London and 1% in Prime Central London (PCL) in 2026. Expected interest rate cuts and increased clarity around taxes following the Autumn Budget should support activity, although gains are likely to be capped by weak economic growth and subdued buyer sentiment. In Greater London, affordability remains a significant constraint.
Budget uncertainty contributed to lower activity and prices in London: Rumours of increased taxes for property owners in the run-up to the Budget led many buyers and sellers to delay decisions, reducing activity until the Budget announcement on 26th November. Those who continued to transact generally adopted a more cautious approach. London was particularly susceptible to this uncertainty, which may have contributed to average prices falling 1.8% * in the capital.
Inflation pressures have been easing but still affect affordability: UK inflation fell to 3.6% in October 2025 but is still well above the Bank of England’s 2% target. However, regular pay has been rising above the rate of inflation since mid-2023. Mortgage affordability for first-time buyers remains stretched: the average monthly mortgage payment is 33.8% of income UK-wide and 43.6% in Greater London, above the 10-year averages of 31.1% and 41.6% respectively. However, both have improved from peaks of 38.4% and 49.7% in 2022. The latest ratio for Inner London is 55.6%, although this market is driven more by global factors than typical domestic economic conditions.
Consumer sentiment influenced by job‑security considerations: Rising uncertainty over employment, particularly in sectors such as technology and especially in London, combined with only modest real pay growth, has encouraged households to take a more measured approach to spending and property decisions. At Chestertons, we have observed buyer numbers falling 11.4% year-on-year, reflecting a more cautious and considered approach among buyers.
Supply trends may be creating opportunities for buyers: While supply remains constrained in London, there are early signs of this easing. For example, many buy-to-let landlords are putting rental properties on the market due to rising regulation and taxes. Housebuilding starts have declined in the capital for several reasons, but the Government and London Mayor have introduced temporary measures to boost new construction. Combined with recorded price reductions and slower demand in some segments, this could give buyers slightly more choice and bargaining power, helping to stabilise prices and improve affordability.
Chestertons does not expect property prices to move more than low single digits across London or the UK in 2026 but believes that improved clarity from the Autumn Budget will release some of the pent-up demand from those who didn’t have the confidence to move in the second half of 2025. This should prompt increased transaction levels in the first few months of the year, which could in turn start exerting upward pressure on prices.
However, whether this positive momentum is sustained throughout the rest of the year will be dependent on whether general consumer confidence improves and the Government avoids the degree of damaging speculation ahead of the 2024 and 2025 Budgets. Lower inflation and a Bank of England interest rate cut could help support this.
In Prime Central London (PCL), we expect modest growth as the market stabilises. This is supported by strong fundamentals, including an enduring supply-demand imbalance, global investment appeal (particularly from the Middle East, the US, and Hong Kong), a stable legal and tax framework, and historically strong long-term performance, which continue to drive the market. It is worth noting there were no further interventions in the 2025 Budget after the ‘non-dom’ intervention in 2024 and the ‘Mansion Tax’ should make little difference.
Greater London | Prime Central London | UK | |
2026 | 2% | 1% | 2% |
*Source: UK House Price Index summary: September 2025 - GOV.UK
Chestertons expects rents to rise by around 2% in Greater London and 3% in Prime Central London in 2026. Strong demand from tenants, combined with a steady supply of rental properties, is expected to support this growth, while ongoing affordability pressures and the introduction of the Renters’ Rights Act (RRA) are likely to moderate it. Despite initial concerns about the impact of the RRA, many landlords are continuing to let their properties rather than sell, helping to maintain supply and overall stability in the market. The relatively limited financial impact of rental taxes and council tax surcharges further supports a balanced outlook.
‘Reluctant’ landlords unable to exit due to slower sales market: Various legislation and tax changes over recent years, including the RRA, encouraged some private landlords to consider exiting the market. However, the slow and uncertain sales market prevented many from doing so, resulting in continued letting and supporting rental stock levels.
Tenant affordability pressures persisted: With rents consuming an estimated 40% of household incomes, tenants have proved unwilling to absorb rent increases, inhibiting rent inflation. Affordability pressures are expected to persist, partly due to frozen income tax thresholds until 2031.
Budget supports market stability: Despite widespread concerns in the months leading up to the announcement, the Autumn Budget had a very limited impact on landlords. While the freeze on income tax thresholds may slightly reduce tenants’ disposable incomes, the 2% increase in rental income tax and the High-Value Council Tax Surcharge are unlikely to materially affect most landlords.
If the sales market improves as anticipated, some landlords may be able to sell rental properties they had previously held back, potentially reducing rental supply. Combined with the ongoing strong tenant demand, this could cause rents to resume their upward trajectory, underpinning the modest growth we expect across Greater London and Prime Central.
At the same time, measures aimed at supporting tenants’ disposable incomes, along with the limited financial impact of rental taxes and surcharges on landlords, should help prevent extreme rent increases. The Renters’ Rights Act, which comes into force on 1st May 2026, will restrict most landlords from accepting offers above asking price and asking prices may increase slightly as a result of this.
In Prime Central London, the recent increase in buy-to-let mortgage applications indicates that the area remains an attractive proposition for investors. Well-located properties in areas of low supply will be in high demand amongst tenants, pushing rents up faster – up to 3% - than in other areas of London.
Overall, we anticipate a balanced and stable rental market in 2026, giving landlords confidence to continue letting while offering tenants greater security and choice.
Greater London | Prime Central London | UK | |
2026 | 2% | 3% | 2% |