Why we should be positive about the UK Property Market in 2026

The UK property market has endured a period of macroeconomic pressure: elevated interest rates, fiscal uncertainty and subdued transaction levels challenged many participants. However, as we step into 2026, several compelling demand- and supply-side indicators suggest the balance of forces is beginning to tilt in favour of renewed confidence and sustainable growth. From record-high Rightmove activity on Boxing Day, to improving affordability from lower interest rates, and strengthening conditions for developers to unlock dormant projects, there are real reasons for optimism across key real estate sectors.
 

In this piece, we examine why Residential, Commercial and Purpose-Built Student Accommodation (PBSA) markets are positioned for a more constructive 2026, underpinned by economic momentum, structural demand and pent-up activity that was delayed through 2025.
 

Residential: Momentum Building After Discounted 2025
 

Rightmove Boxing Day activity signals renewed demand
One of the most striking early indicators for the residential market is the record-breaking surge in Rightmove traffic on Boxing Day 2025, with visits nearly doubling from Christmas Day and engagement metrics, including buyer and seller inquiries, rising sharply. This “Boxing Day bounce” has historically acted as an informal launch pad for the year’s housing market cycle, signalling latent demand ready to convert into transactions once fiscal uncertainty subsides. Sources tracking this activity reported the busiest ever traffic spikes on Boxing Day, along with strong continued viewings into early January. 

Improving affordability through lower borrowing costs
The prevailing consensus among economists and financial markets is that the Bank of England base rate is expected to trend gradually downward through 2026, rather than increase. Following the peak tightening cycle of 2023–24, monetary policy is widely expected to continue easing as inflation moderates and economic growth remains subdued. Most mainstream forecasts point to a gently declining base rate through the first half of 2026, with rates likely settling in the c.3.0%–3.5% range by mid-to-late 2026, before plateauing as the Bank prioritises stability over aggressive stimulus. Cheaper financing improves monthly mortgage costs, enabling a larger pool of buyers, especially first-time entrants, to consider purchasing, a trend that is now feeding through into higher engagement on property platforms and stronger enquiry pipeline. 
With house price forecasts showing a modest ~2% rise across 2026, this stability represents a shift from the flat-to-slight-decline backdrop of late 2025, and positions the residential market in a more balanced, sustainable growth trajectory. 

Developers with traction on supply latency
Higher borrowing costs over the previous years had constrained developer margins and led many to defer consenting or start dates on previously landed schemes. As base rate forecasts point to a gradually easing and more predictable cost of capital through 2026, rather than a renewed tightening cycle, developers are increasingly able to revisit schemes that were parked because of margin compression. Lower financing costs, when combined with better pricing visibility, enable a broader set of projects to reach viability thresholds. That, in turn, helps alleviate supply bottlenecks in key regions and supports smoother pricing momentum. Recent industry sentiment points to an uplift in builder confidence tied to expected lower interest costs and stronger buyer engagement early in the year. 

Commercial: Resilience and turning points

Adapting to new occupational norms
The commercial real estate market continues to evolve, driven by shifting occupier behaviours, hybrid work patterns and investors’ tilt toward flexible, mixed-use assets. While certain traditional office segments are still adjusting, demand streams for logistics, last-mile distribution and experiential retail remain robust, reflecting broader structural trends in how companies and consumers use space.
With borrowing costs becoming more predictable, occupiers and investors alike are better able to underwrite leases and acquisitions with confidence. As capital costs ease, owners of offices and commercial assets can also pursue repositioning and refurbishment strategies to better match evolving occupier needs.
 

Transaction Momentum Supported by Lower Rates
Lower expected base rates help reduce the cost of debt for investors, improving levered returns and underwriting flexibility in commercial transactions, particularly value-add and repositioning plays. This uplift in financing confidence supports investment activity and gives lenders and buyers greater certainty on exit yields. These dynamics, coupled with ongoing capital inflows into secondary and tertiary markets, indicate a more constructive commercial investment environment in 2026.
 

PBSA: Structural Demand and Demographic Tailwinds
 

Purpose-Built Student Accommodation stands out as a structurally resilient sub-sector, underpinned by robust enrolment trends and rental demand that remains decoupled from broader economic volatility. Even as general household formation and buy-to-let investor activity adjusts to new macro conditions, PBSA continues to benefit from:

• Consistent and growing demand from domestic and international students
• Higher occupancy rates driven by modern, amenity-rich stock
• Predictable rental income streams relative to other asset classes
 

The demographic tailwinds, including sustained university applications and steady inflows of overseas students, create a durable floor under rental demand. This makes PBSA an attractive proposition for investors seeking lower downside risk and stable cash flows, even as broader markets normalize.
 

Conclusion: A balanced yet upbeat 2026 outlook
While 2025 presented headwinds in the form of tax speculation and interest rate pressures, the early signals for 2026 are distinctly more positive. Elevated property search activity over Boxing Day reflects pent-up demand returning to the market, base rate forecasts point to improved affordability and better financing conditions, and developers are finding renewed reasons to build on projects that were previously deferred.
 

Across residential, commercial and PBSA sectors, the narrative for 2026 centres on stabilisation, measured growth and structural resilience. Market participants, from first-time buyers to institutional investors, are beginning the year with clearer signals of confidence and activity, which in turn should support transaction volumes and valuation sustainability as we progress through the year.