The UK housing market is undergoing a significant adjustment phase, with the latest data and forecasts from Knight Frank reflecting a more cautious outlook for the year ahead. A combination of political uncertainty, increased supply, and the potential for changes in UK tax policy have created an environment where both buyers and sellers are reconsidering their positions. This shifting landscape is leading to revised expectations for house price growth, an evolving rental market, and important considerations for current homeowners.

One of the most notable developments is the downward revision of house price forecasts by Knight Frank, a leading global real estate consultancy. In May, Knight Frank projected that UK house prices would rise by 3.5% in 2025 and 4.0% in 2026. However, in light of recent market data and increased uncertainty, these forecasts have now been significantly reduced. The firm expects UK house prices to increase by just 1% in 2025 and 3.0% in 2026. This reflects a more measured outlook, as a confluence of factors dampens the prospects for rapid growth.

The primary drivers behind the reduction in growth expectations include ongoing political uncertainty, which has made both domestic and international buyers more cautious. With general elections and possible policy shifts on the horizon, many are adopting a wait-and-see approach, postponing major property decisions until there is greater clarity. In addition, the possibility of changes to UK tax policy, particularly around property and capital gains, has added another layer of unpredictability. Such potential shifts could impact the relative attractiveness of property as an investment, further influencing market behavior.

Beyond political factors, the market is also contending with a notable imbalance between supply and demand. According to Knight Frank’s latest figures, the number of new sales listings has increased by 6% in the year to August compared to the previous 12 months. This rise in supply has not been matched by demand, as new prospective buyers were 8% lower during the same period. This divergence is putting downward pressure on pricing, as more properties are chasing fewer buyers. Sellers, especially those looking for a swift transaction, may find themselves needing to be more flexible on price or incentives.

This current environment of high supply and subdued demand is a marked contrast to the competitive, seller-driven market of recent years. For many prospective buyers, concerns about the economy, the potential for interest rate changes, and uncertainty around government policy are prompting them to delay purchasing decisions. Some are waiting in the hope that prices will soften further, while others are reassessing their ability to secure favorable mortgage terms in the future.

The slowdown in house price growth is having a ripple effect on the rental market. As buying becomes less attractive or more challenging for some households, the demand for rental properties is expected to rise. This shift is likely to put upward pressure on rents, particularly in areas where supply is already constrained. For renters, this may translate into higher costs and increased competition for available properties. For landlords, the environment offers both opportunities and challenges. For while higher rents may boost yields, the regulatory landscape and the potential for further policy changes require careful navigation.

Amid these changes, current homeowners face important decisions. With interest rates currently at relatively low levels but the potential for future increases, those considering remortgaging may benefit from acting sooner rather than later. Locking in at a competitive rate now can offer longer-term security and protect against the risk of higher payments in the future. Homeowners are advised to explore their options by shopping online with remortgage brokers. There is also a range of online tools available, enabling borrowers to compare rates, estimate potential savings, and better understand the remortgaging process.

The UK housing market is at a crossroads. Knight Frank’s latest forecasts underscore a shift to more modest price growth, as elevated supply and reduced demand weigh on the outlook. Political uncertainty and the possibility of tax changes add further complexity, influencing both buyer and seller behavior. For those unable or unwilling to buy, the rental market is likely to absorb the spillover, potentially driving rents higher. Homeowners, meanwhile, are encouraged to review their mortgage arrangements in light of current conditions. As the market continues to evolve, staying informed and seeking savings will be essential for making sound property decisions.