House Price Trends in the UK and Beyond: What the Latest Data Tells Us About Early 2026

House Price Trends in the UK and Beyond: What the Latest Data Tells Us About Early 2026

Early 2026 finds the UK housing market in that familiar British mood: not quite gloom, not quite boom—more like a steady drizzle after a storm. The latest read on prices at the turn of the year says the market cooled into December 2025 rather than accelerating. Halifax reported the typical UK home at £297,755, down 0.6% month-on-month, with annual growth slowing to 0.3%—its weakest pace since early 2024—while noting big regional differences (London weaker; Northern Ireland notably stronger).

That “soft landing” matters because it resets expectations for what “normal” might look like in 2026. For much of the post-pandemic period, buyers got used to dramatic swings—first the surge, then the affordability crunch. Now, the data suggests a market that is moving again, but with modest momentum and lots of local texture. Official measures are cooler than the headline-grabbing peaks: the UK House Price Index dashboard showed an average price around £269,862 as of October 2025 (different methodology/timing versus lender indices), with annual change at +1.7%, and ONS’s bulletin (covering earlier months) showed annual growth easing to +2.6% for the 12 months to September 2025. The common thread across sources is deceleration rather than collapse.

So what changed as we stepped into 2026? The biggest single force is the direction of borrowing costs—and not just where they are, but where households think they’re going. In mid-December 2025, the Bank of England cut Bank Rate to 3.75% (a close vote), and it has signalled any further declines are likely to be gradual and conditional on inflation and pay growth continuing to ease. Mortgage pricing doesn’t mirror the base rate one-for-one, but lenders respond to the shift in expectations; early January already brought visible competition, with major lenders cutting mortgage rates and commentators talking about the potential for sharper deals by spring if the market stays competitive.

At the same time, the UK isn’t entering 2026 with runaway transaction heat. Mortgage approvals—a decent forward indicator of near-term activity—were around the mid-60,000s in late 2025, roughly in line with pre-pandemic norms rather than frenzy territory, and November 2025 even showed a small dip versus October. In other words, demand is alive, but it’s not stampeding. That sets up a year where price growth, if it happens, is more likely to come from tight supply and selective demand than from anything like a broad-based bidding-war culture.

This is why most mainstream UK forecasts for 2026 cluster around “modest gains.” Halifax itself has pointed to 1–3% growth as a plausible range for 2026, and Rightmove—tracking asking prices rather than achieved sale prices—expects around +2% in new seller asking prices by the end of 2026, with stronger performance in relatively lower-priced regions and a slower lane for London and the South. A Reuters poll of economists similarly leaned toward a mid-single-digit-ish calm rather than fireworks, with a central expectation of roughly +2.8% in 2026 (after a modest 2025). Taken together, the market’s base case for early 2026 looks like this: affordability gradually improves as rates edge down and wages (hopefully) keep up, while prices grind slightly higher overall—but with big “postcode politics.”

That postcode politics is the real story buyers feel day to day. Halifax’s regional breakdown into late 2025 showed London slightly down year-on-year while Northern Ireland was far stronger, and Rightmove explicitly expects northern England, Wales, and Scotland to have more resilience than higher-priced southern markets. This isn’t mysterious: when mortgage rates are still meaningfully higher than the ultra-low era, expensive markets tend to feel the affordability squeeze first. A 0.5% rate shift bites much harder on a larger loan.

Now zoom out beyond the UK, and you see something interesting: a world where housing isn’t moving in one synchronized wave anymore. Europe, North America, and Australasia are all wrestling with the same core ingredients—interest rates, supply constraints, immigration/demographics, and real income growth—but the recipe proportions differ by country.

In the euro area and EU, Eurostat’s latest release (for Q3 2025) still showed annual price growth running hot: +5.1% in the euro area and +5.5% in the EU, with quarterly growth at +1.6% in both. That’s a reminder that large parts of Europe entered 2026 with more upward pressure than the UK—often because of chronic undersupply in major cities, planning constraints, and tight rental alternatives. The implication for early 2026 is less about a sudden reversal and more about whether easing inflation and stabilizing rates allow buyers to keep absorbing higher price levels without cracking demand. If financing conditions loosen even slightly, Europe’s supply problem can reassert itself quickly.

The United States is a different shape of story: it’s been constrained not only by affordability, but by the “lock-in effect,” where homeowners with older ultra-low mortgage rates are reluctant to sell. The latest hard index prints show slower national price momentum than Europe: the S&P CoreLogic (now branded S&P Cotality) Case-Shiller National Index posted an annual gain of about 1.4% for October 2025. Forecasting, however, is more optimistic than those recent trailing numbers. Fannie Mae’s Home Price Expectations Survey (HPES) had a panel of experts expecting around 3.6% home price growth in 2026, and Fannie Mae’s separate outlook also anticipated mortgage rates ending 2026 lower than 2025 (around the high-5% range), alongside improved sales volumes. Put plainly: early 2026 in the US is expected to feel less like a crash-and-rebound and more like a slow thaw—prices rising modestly, sales improving gradually, and regional winners driven by jobs, migration, and relative affordability rather than a national tide lifting everything.

Canada sits somewhere between the US and the UK in tone: heavily shaped by rates and affordability, but with structural supply issues and strong population growth in key metros. The Canadian Real Estate Association’s quarterly forecast points to a 3.2% increase in the national average home price from 2025 to about $698,622 in 2026. That’s the kind of forecast that doesn’t promise drama, but it does suggest persistence: even after a choppy few years, the base case assumes Canada remains supported by tight supply and underlying demand, with affordability the main brake.

In Australia, the conversation going into 2026 leans more bullish than in the UK, though it comes with the same warning label: affordability is strained, and supply is thin. Media coverage of Domain’s forecasting has pointed to a notable rise for combined capital city house prices through 2026 (figures reported around mid-single digits), implying continued upward drift rather than stagnation. Australia’s key tension is that price gains can continue even when buyers complain bitterly about them—because the market can remain undersupplied for long stretches, especially in the cities where jobs cluster.

New Zealand’s outlook feels like a cousin of the UK’s—moderation, but not malaise. Reporting in early January 2026 cited major-bank economists expecting something like around 4% growth over 2026 (with similar numbers attributed to the Reserve Bank’s view), while ANZ has also published a forecast in the same general ballpark (mid-single digits). The story here is less about a re-run of the 2021 mania and more about a recovery that tries to track income growth, with rates easing helping the floor hold.

Southern Europe has its own twist. Spain, for instance, is being framed by some research as entering a “new expansionary phase,” with CaixaBank Research expecting demand to stay historically high in 2025 and 2026 (on the order of hundreds of thousands of annual sales), which—combined with supply limits—leans toward continued price growth, even if the pace cools from prior highs. This matters for UK buyers with an overseas-property itch: if the financing environment in Europe loosens while demand stays robust, the bargain-hunting window can narrow quickly in prime coastal and city markets.

Put all of this together and you get a practical framework for “early 2026 forecasts” that doesn’t rely on pretending anyone can see the future perfectly. The baseline across many developed markets is modest nominal price growth, driven by the same three pillars: (1) rates are no longer rising and may drift down; (2) supply is structurally constrained in many places; (3) households are adapting—choosing smaller homes, different locations, longer mortgage terms, or simply waiting until the monthly payment looks tolerable.

For the UK specifically, early 2026 is likely to feel like a market testing its own footing. If mortgage rates keep easing and employment holds up, demand should gradually re-engage, especially among first-time buyers who were frozen out when rates jumped. Halifax explicitly pointed to improving affordability (including a lower price-to-income ratio versus recent years), and Rightmove expects a “more positive year” for first-time buyers thanks to better choice and improving affordability—while still warning that outcomes will vary sharply by region and price point. But if the labour market weakens or inflation proves sticky—forcing the Bank of England to keep policy tighter for longer—then the market could stay flat in real terms even if nominal prices edge higher.

And that’s the final nuance worth holding onto as you read forecasts: most of the numbers being discussed for 2026 are nominal. With UK inflation still running above the 2% target recently (though easing), a year of “+2% house prices” can still mean housing is quietly getting cheaper in inflation-adjusted terms. That is often what a soft landing looks like in practice: not a dramatic drop that resets everything overnight, but a long-ish period where prices tread water while incomes and inflation do the hard work of repairing affordability.

So, if you’re looking for the most defensible story to tell in early 2026—based on the latest prints and the most-cited mainstream forecasts—it’s this: the UK is entering a year of modest growth and high regional variation, helped by easing rates but constrained by affordability and economic uncertainty; Europe, in aggregate, still shows stronger price momentum; the US looks set for a gradual improvement with modest price gains and slowly improving transactions; Canada is projected to edge higher again; and Australasia leans moderately upward, with supply constraints doing a lot of heavy lifting. The risks are real, but the dominant theme isn’t a cliff—it’s a careful, uneven recalibration.