We had expected 2026 to usher in a new phase of the housing cycle, with higher price growth in more affordable markets in recent years giving way to stronger performance in more expensive southern regions as mortgage rates improved in the second half of the year. Early-year expectations included two further base rate cuts, and by early February best-buy mortgage rates had reached 3.5%. The delay between listing and exchange—currently averaging 200 days—would mean improvements would take time to feed through to house price indices, but we were confident that prices would rise across most UK markets this year.
That changed at the end of February, with the impact of the ongoing conflict in the Middle East having a significant impact on sentiment, debt costs and the outlook for many global economies, including the UK. Forecasters have downgraded their UK GDP projections accordingly, with the IMF now expecting growth of 0.8% this year compared to their previous forecast of 1.3%.
While swap rates—used as a proxy to set fixed-rate mortgages—have settled somewhat and more competitive rates have entered the market, we now think it unlikely that we will see the lower rates and improvements in market sentiment we'll need to support our November view on prices and rents this year.
House price forecast
We now expect house prices to remain broadly flat nationally in 2026, with prices forecast to end the year down 0.5%, compared with our previous +2% forecast.
Some more affordable markets should end the year in positive territory, but we expect growth will be lower than inflation across all UK regions this year.
London, where prices have fallen by an average of 3.3% in the year to February according to the Office for National Statistics, is now forecast to end the year down 2.5%, against our previous forecast of +1%. For central London is it sentiment rather than rates which will likely have a greater impact.
Our JLL Prime Central London Index (based on agent valuations and excluding new homes) saw values fall 2.2% in Q1 compared with Q4 with prices down 8.7% year on year in March. Similarly, transaction-based indices from LonRes are showing prices in the three months to April 2026 9.1% lower than the same period in 2025.
Our previous forecasts expected prices in central London would begin to recover in the latter part of the year, with values forecast to end the year flat (effectively H1 falls being cancelled out by H2 gains). However, we now expect that the improvements in market conditions needed to support growth in prices (remember we'd need to see growth of 2.2% for our PCL Index to end the year flat) are unlikely to materialise this year. We are therefore forecasting prices will fall 5.5% in 2026.
Rental forecast
With fewer tenants expected to move into owner-occupation and inflation now forecast to end the year higher, we have upgraded our 2026 forecast, with rents now expected to rise 3.5% nationally, up from the 2.5% forecast in November. We anticipate higher rental growth in London too, with rents forecast to increase 3% this year.
Challenges around rental affordability will likely constrain the prospects for more significant rental growth over the five-year period. Over the longer term, we continue to expect pressure on landlords to comply with EPC C standards by 2030 will fuel rental growth towards the latter part of our five-year forecast period, as properties are removed from the market either for sale or improvement.
Rental growth in the five years to 2030 is now expected to total 16.5% nationally and 17.1% in London, a one to two percentage point increase compared with our previous forecast.
JLL's Residential and Living team
JLL's Residential and Living team consists of over 300 professionals who provide a comprehensive end-to-end service across all residential property types, including social housing, private residential, build to rent, co-living, later living, healthcare and student housing.
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