New Year, New Market?
As we welcome 2026, it is customary in the UK for many to have a clear-out, alongside Dry January and the self-deception of gym-based pledges. As we now exist in a world of immediate gratification, we start Christmas in October, we just about have time for Spring cleaning in January, before the shops are filled with Easter Eggs in February. So to continue on that rushed vein, amongst the bin liners of ragged tinsel, we are clearing out some of the old topics we have long debated, with a final look at house price predictions before this narrative goes back in the loft with the threadbare tree for another year.
As the UK housing market trundles through the latter half of the decade (which in itself sounds strange), professional commentators are broadly aligned on one point: 2026 is unlikely to be a year of dramatic house price movement in either direction. Please keep reading, though, albeit I appreciate that neuters this one somewhat before we even begin. Most published & professional analysts expect a continuation of the themes that have shaped the post-pandemic market: affordability pressure, constrained supply, and cautious sentiment.
After the volatility of 2022–2024, driven by sharp interest-rate rises and inflationary shocks, the market has likely now entered a more stabilised phase, and by later in 2026, consensus forecasts suggest mortgage rates will be lower than their recent peaks but still materially higher than the ultra-cheap debt environment of the 2010s. This “new normal” for borrowing costs is expected to cap how far prices can rise, even if demand remains resilient.
Economists are predicting modest nominal price growth, typically in the low single digits. When adjusted for inflation, many active voices online are forecasting that real house prices could be broadly flat or even slightly negative. In other words, while prices may edge higher in cash terms, their purchasing power is unlikely to increase meaningfully. Affordability remains the central constraint. Wage growth has improved, but not enough to fully offset higher mortgage costs and elevated living expenses. As a result, first-time buyer demand (historically a key driver of price inflation) is expected to stay subdued. Professional commentators often describe the market as “two-speed”: prime and supply-constrained locations may see firmer pricing, while secondary markets remain sensitive to economic headwinds.
As we frequently & historically comment on, supply dynamics also play a critical role in 2026 forecasts. The UK continues to underbuild relative to household formation, which provides a structural floor under prices. However, developers, our clients, face their own challenges: higher build costs, tighter planning regimes, and cautious development finance markets. These factors limit new supply but also restrain aggressive land bidding, which historically fuels price booms.
Importantly, and this is probably what most readers are interested in, most commentators do not foresee a major crash. The lending environment in the UK and across the Western world is far more conservative than in previous cycles, with stricter affordability tests and lower leverage across the system. Forced selling remains limited, employment is relatively robust, and homeowner equity levels are high. This combination supports stability rather than sharp correction. In short, the professional consensus for 2026 is one of moderation: neither a return to rapid house price inflation nor a dramatic downturn, but a market adjusting to higher capital costs and more realistic growth expectations. So I know what you're thinking, if you have made it this far, that’s all pretty vanilla, we know this, what are you actually saying here?
Well, perhaps what we are saying here, and maybe this is why we are anxious to get this topic filed away under yesterday's news, is that even though it dominates discourse, it’s essentially not that relevant.
While headlines about house prices often dominate property discussions, their relevance depends entirely on perspective. For platforms like ours, high house price inflation is not inherently positive and can often be counterproductive. It’s the one metric that everyone is conflicted about: an overvalued property looks great on paper, but not so great in the market. In development finance, rising prices are frequently accompanied by rising costs. When residential values rise rapidly, land prices follow suit. Build costs tend to rise as labour and materials become more expensive, and competition for sites intensifies. The result is that developers’ margins are often squeezed, not expanded, during periods of strong price inflation. There is, in fact, a negative correlation between rapid house price growth and the ability to build and sell homes at scale. Elevated land values make schemes less viable, slow planning negotiations, and reduce the pool of deliverable projects. In contrast, stable or modestly growing markets allow developers to price risk more accurately, control costs, and bring forward schemes with greater confidence.
This is why Invest&Fund’s approach is deliberately structured around conservative leverage and downside resilience, rather than speculative assumptions about future valuations. Loan-to-value ratios of 65–70% of Gross Development Value (GDV) are not arbitrary; they are designed to absorb valuation movements, cost overruns, and market softening without impairing borrower or investor outcomes. By lending well below total GDV, Invest&Fund builds in a substantial equity buffer from day one. This means that even if exit values are lower than originally forecast, due to macroeconomic factors, interest-rate changes, or local market shifts, the loan's structure remains robust. Borrowers retain flexibility, and investors benefit from capital protection that does not rely on optimistic house price growth.
Crucially, this disciplined approach aligns interests across the entire transaction. Developers are incentivised to focus on delivery and execution, not speculation. Investors receive returns generated by contractual interest and prudent risk management, rather than exposure to cyclical valuation swings. In a market environment like that expected in 2026, stable, cautious, and shaped by affordability, this philosophy becomes even more relevant. Success is determined less by where headline house prices go and more by how well projects are structured, financed, and managed.
Ultimately, Invest&Fund is not in the business of predicting house price cycles; we have no crystal ball, we have no driver to feed sensationalism, or the pseudo-science of transactional data. It is in the business of financing real assets with real margins, underwritten on the basis that markets can move both ways. In that context, whether prices rise modestly, stagnate, or soften slightly matters far less than ensuring that every loan is built to withstand uncertainty.
And that is precisely why conservative leverage, realistic GDVs, and disciplined underwriting remain at the core of the Invest&Fund model, regardless of what 2026 brings, and is why the age-old debate around house prices is very much being packed away for now as we move on to pastures new for 2026.
Invest & Fund has returned over £330 million of capital and interest to lenders with zero losses, showing the rigour that governs our business.
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