Editor's note: This brief was summarised by The Property AI Newsroom from a report by Property Industry Eye. Read the original article for full details.
House Price Forecasts for 2026 Downgraded Amid Buyer-Seller Gap
UK house prices fell for a third consecutive month in May, according to the latest Halifax House Price Index. The average property value dropped by 0.1% to £298,806, following a similar decline in April, while annual house price growth edged up slightly from 0.4% to 0.5%.
The report highlights that higher mortgage costs and growing economic uncertainty are continuing to weigh on buyer demand. The conflict between Iran and Israel has contributed to increased wholesale energy prices and rising mortgage rates, impacting the UK housing market.
In response to these conditions, several estate agency groups have revised their house price forecasts for 2026. Savills has adjusted its outlook from 2% growth to a 2% decline in average UK house prices for this year, citing concerns over affordability, higher mortgage costs, and increased economic uncertainty. Knight Frank has also downgraded its market expectations, but still anticipates house prices to end 2026 with modest growth.
The revisions come as a widening gap emerges between buyer budgets and seller expectations. Higher borrowing costs are limiting purchasing power and putting pressure on asking prices. According to Chris Hodgkinson, managing director of House Buyer Bureau, buyers are negotiating harder and are unwilling to overpay, while sellers who hold out for higher prices risk longer selling times and potentially lower offers.
The concern for agents is whether this gap will continue to widen in the second half of the year, potentially placing further downward pressure on house prices. Despite these challenges, the market has shown a relatively resilient level of activity.
Source: Property Industry Eye