UK Property Market Update: Rising Prices, Cooling Rents & New Reforms in 2026

As we move into February 2026, the UK property market is showing a compelling blend of growth, cooling trends, and policy shifts. From surging buyer confidence to moderated rental rates and new government reforms, here’s what you need to know about the current state of the UK housing sector.

Steady House Price Growth

According to the latest figures, average UK house prices reached £271,000 by November 2025 — a 2.5% annual increase. This positive trend reflects continued demand across the country and a strong start to the year’s market activity.

Breaking it down by region:

England: £293,000 average price (+2.2% YoY)
Wales: £209,000 (+0.7% YoY)
Scotland: £193,000 (+4.5% YoY)

Scotland leads the way in terms of house price growth, while Wales shows slower momentum.

Rental Market Cools

Whilst house prices climb, the UK rental market is seeing some relief. After years of sharp rental inflation, average rents declined between 1.2% and 2% in January 2026. London rents experienced an even steeper fall of 2.4% month-on-month.

Despite the recent monthly drop, annual rental growth remains positive:

England: £1,424 average rent (+3.9% YoY)
Wales: £822 (+5.7% YoY)
Scotland: £1,018 (+2.8% YoY)

This rental moderation may signal a rebalancing after intense post-pandemic growth, offering renters a welcome breather.

Buyer Confidence on the Rise

Estate agents report growing market confidence, especially in regions like Cambridgeshire, Huntingdonshire, and the Fens. Increased viewing activity and brisk sales indicate that buyers are returning with vigour, helped by improved mortgage availability and stabilising interest rates.

Landlords are also showing a renewed sense of optimism, with 62% feeling positive about the future—up from just 47% a year ago. This shift might encourage greater investment in the rental market, potentially easing supply constraints.

Key Policy Changes: Ground Rents and Rent Standards

The government has unveiled major reforms affecting both leaseholders and tenants:

Ground Rents Capped: In England and Wales, ground rents will soon be capped at £250. This reform could significantly impact the valuation of leasehold flats and make homeownership fairer for buyers of leasehold properties.

Rent Standard 2026 Published: The new Rent Standard outlines rent increase parameters for the 2026/2027 financial year, ensuring transparency and helping tenants better plan for any changes.

Interest Rates Hold (Barely)

The Bank of England voted narrowly to hold interest rates in early February 2026, with the decision passed by a single vote. This razor-thin margin reflects underlying uncertainty and suggests we may see rate cuts in the coming months if economic data continues to soften.

Lower rates would ease borrowing costs, potentially further stimulating buyer activity and supporting house price resilience.

Final Thoughts

The UK property market in early 2026 appears to be at an inflection point. House prices are rising steadily, rental pressure is easing, and both buyer and landlord sentiment are on the mend. With key legislative reforms underway and potential interest rate cuts on the horizon, this year could see more balanced growth and renewed opportunity for all market participants.

Whether you’re a prospective buyer, landlord, or tenant, staying informed and adaptable will be key to navigating the shifts ahead.