Despite the recent increase in the supply of homes on the market, we think the combination of looser lending standards, further falls in mortgage rates and decent wage growth will allow housing transactions to climb above their pre-pandemic levels and house prices to rise by 3.5% in the year to Q4 2026, which would be more than the consensus forecast of 2.0-3.0%, and by 3.0% in the year to Q4 2027. In the rental market, the faster-than-expected fall in net migration has prompted us to lower our 2026 market rents growth forecast to 2.8% (3.4% previously), but tighter supply will cause it to accelerate to around 4.0% in 2027.
We’ll be discussing the outlook for Bank of England, Fed and ECB policy in a 20-minute online Drop-In at 3pm on 5th February (register here).
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