The UK housing market is poised for a significant rebound in early 2026, according to property portal Zoopla, following a period of stagnation caused by pre-Budget speculation over new property taxes.
Pre-Budget Uncertainty Stifles Market Activity
In the weeks leading up to the November Budget, rumours of potential new taxes on homes valued over £500,000 created widespread uncertainty. This speculation had a tangible cooling effect on the market. Zoopla's data reveals that buyer demand fell by 12% in the four weeks to November 23 compared to the same period last year. The number of sales agreed also dropped, with the usual Christmas slowdown starting earlier than anticipated.
This hesitation was reflected in house prices. For the first time in 18 months, Zoopla recorded annual price falls across southern England in October. London saw a slight dip of 0.1%, while the South East also fell by 0.1%. The South West of England experienced a slightly larger decrease of 0.2%.
A Budget with Less Bite Than Feared
The actual Budget measures announced on Wednesday proved to be far less dramatic for the majority of homeowners than the pre-announcement fears had suggested. The government confirmed a new high-value council tax surcharge, but it will only apply to a very small segment of the market.
Starting in April 2028, the surcharge will affect properties in England valued above £2 million. The charge will be tiered, starting at £2,500 per year for homes over £2 million and rising to £7,500 for properties worth more than £5 million. This levy will be paid by the property owner, not tenants, and is estimated to affect fewer than 1% of UK properties, raising over £400 million in 2029-30.
The absence of any new annual property tax on homes over £500,000 has been cited as a key reason for the expected market recovery.
Regional Divergence and a Positive 2026 Outlook
While the South experienced a downturn, the UK housing market told a story of two halves. More affordable areas continued to see robust growth. Across the UK as a whole, the average house price increased by 1.3% annually in October, reaching £270,200.
Strong annual growth of close to 3% was recorded in the North West of England, with increases of 2-3% across the rest of Northern England, Scotland, and Wales.
Zoopla predicts that the clarity provided by the Budget will boost housing market activity at the start of 2026. Sellers in southern England, where there is a higher concentration of homes valued at over half a million pounds, are expected to see the biggest boost in activity, although a high supply of homes will likely keep price growth in check.
Richard Donnell, Executive Director at Zoopla, stated: "The Budget bark was worse than the Budget bite for the housing market. Home buyers and sellers will welcome the end of the uncertainty that has stalled housing market activity since the late summer. With greater certainty we expect a rebound in housing market activity that builds into the new year."
This optimistic sentiment is echoed by industry leaders. David Powell, CEO of Andrews estate agent, commented: "I expect the market to bounce back from any damage caused by leaked or shelved policies... and we will see activity levels increase across the South throughout 2026."
