Property index
The UK property index shows a turning point in 2026, lagging behind inflation. This clearly reflects the general deterioration in market conditions.
Number of real estate transactions
Property transaction volumes in the UK have been falling for the fifth year in a row, a clear sign of market recession. 2025 proved to be a turning point in shaping future trends. Although the decline was moderate, it remains highly indicative.
Average price per square metre
The average price per square metre in London exceeds £7,000, significantly ahead of other cities.
Rental yield
Rental yields continued to rise in 2025. Although the pace of growth slowed compared with 2024, it remains at a relatively high level.
Exceptions
Rental yields are generally higher in cities with a lower price per square metre. In London the average rental yield is below 5%; in individual districts, however, it can reach 10%, and in some parts of Manchester, such as M14, yields reach 12% per annum. By European standards these are exceptionally high yield levels.
In 2025 the UK property market was characterised by stabilisation following the sharp cooling of 2022–2024. Transaction volumes fell moderately compared with 2024 — within the low single digits — confirming subdued demand amid still-high borrowing costs. Overall price dynamics remained flat: most regions saw stagnation or a slight correction in real terms, while nominal prices were supported by limited supply and low seller activity. London and the South East continued to show relative resilience, albeit without a return to previous growth rates. At the same time, certain previously high-demand districts of London recorded a sharp decline in liquidity.
The rental segment firmly established itself as the market's key driver in 2025. A shortage of supply, years of structural under-building and a growing share of households pushed out of the mortgage market drove rents higher still. Rental yields rose across the country and, in several regional cities, reached levels that once again made the market attractive to both institutional and private investors. In effect, 2025 marked the UK's transition from a capital-growth market to a yield-driven one.
The outlook for 2026 suggests the beginning of a more pronounced cyclical turning point. As monetary policy gradually eases and mortgage rates decline, transaction activity is expected to recover, particularly among first-time buyers and those trading up. A sharp rise in prices is unlikely, but the most liquid locations may move from stagnation to moderate growth. The rental market is expected to remain overheated and to continue supporting investment demand. Overall, 2026 could prove a year of structural transition — from a phase of caution and capital preservation to one of selective asset accumulation against a stabilising macroeconomic backdrop. The conditions for full stabilisation, however, are not yet in place.
The continuing outflow of capital from the UK is also expected to have a tangible impact on the property market. This trend is likely to become more pronounced in 2026–2027. 2025 proved decisive for the UK: events took a downward trajectory. In a number of locations, liquidity is expected to continue declining. The key stabilising factor will be the activity of institutional investors, driven by relatively high rental yields.
At present the UK market is largely unsuitable for speculative early-stage (off-plan) capital-growth strategies, with a very limited number of exceptions. Rising social tensions and shifting economic conditions further undermine market stability. We recommend viewing the UK property market primarily as a source of rental income rather than capital appreciation.
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