minute read
FUTURE PROSPECTS
RENTS TO RISE
2026 will be the year that markets come to terms with the loss of fixed-term tenancies; the end of no-fault evictions and the arrival of far greater tenants’ rights to challenge rent increases. The way landlord and tenant behaviours change will be pivotal for the medium-term outlook for London’s housing market.
We believe that The Renters’ Rights Act will encourage investors to sell, discourage new investors from buying and thereby deplete the stock of rental homes – which will, in turn, put upward pressure on rents. The tax surcharge on rental income from April 2027 announced in the Autumn budget, will accelerate the loss of small investors.
The government has announced that it wants England’s elected mayors and local councils to be able to impose a new tourist tax on short lets and holiday lets, amongst other types of accommodation. The fee would apply to visitors’ overnight trips, and the collection of the fee would be down to landlords and operators of short lets, holiday lets, hotels, bed and breakfasts, and guesthouses. This will add inflationary pressure on the rental market at a time when landlords are increasingly looking at short lets to avoid the risks of the long term rental market following the introduction of the Renters’ Rights Act.
The rental market is also being starved of new supply as house construction is at a record low in London. Even if the concessions on affordable housing requirements announced in the autumn do unlock new building, (which is questionable) it will not relieve any pressure on the rental market in the next 2 to 3 years.
New building looks likely to remain sluggish in the year ahead as developers continue to face viability challenges. The Budget did nothing to help First Time Buyers or boost housebuilding, other than announce additional resources for planning. Unfortunately, that does not relieve the burden of labour, materials or borrowing costs.
The additional Council tax surcharge that will be introduced from 2028 will only affect homes valued at more than £2 million and even at that level, the additional charges are less punishing than many feared. Higher band properties will then be revalued every 5 years.
With prices at attractive levels and interest rates on a downward trend, the fundamentals are in place for an improved sales market in 2026. Confidence will be the key driver with buyers continuing to weigh up the relative merits of remaining in the rental sector or taking a stake in property as a long-term home.
Whether stock becomes available to buy, will largely be dependent on the flow of investors keen to exit the rental market. If they continue to take a pragmatic approach, balancing long[1]term aspirations with short-term realities, then we expect to find price levels that are acceptable to both buyers and sellers.
That said, the long shadow of Fire Safety Regulation has not been lifted. Persistent challenges presented by delay and uncertainty will continue to dampen transaction activity in our markets for any property without a valid certification. Grant funding from the Building Safety Fund and action from housebuilders who have pledged to carry out remedial works, show little signs of coming to fruition across many residential apartment blocks in our area. Leaseholders face lengthy waits until their blocks are upgraded and they are able to move on with their lives.
The Government’s plans for a major overhaul of the home buying and selling process will add to the complexity of listing for sale, but would, if successful, streamline the process of sale down the line. The Law Society has introduced new Property Information Forms (TA6) and Leasehold Information Forms (TA7) that become mandatory on 30th March 2026 and reduce duplication of material information from the seller and are clearer to complete.
Binding contracts could be introduced to stop buyers walking away from agreements after sellers spend time answering lengthy pre contract enquiries.
Unfortunately, we are yet to see any new measures to speed up the provision of service charge information. Managing agents are often responsible for holding up leasehold sales by taking many weeks to supply management packs (for which there is a charge), only after sales have been agreed.
With the average time from instruction to completion of sales at more than six months, we welcome these reforms which, alongside greater streamlining of conveyancing services, can form part of a solution to what has become a drag on the property market and the wider economy. At the same time many will remember the last Labour government’s failed Home Information Packs that were introduced in 2007 and abolished in 2010 which reduced the number of homes put on sale, and duplicated costs across buyers and sellers
There will be local elections across London in May 2026 with the results scrutinised as a barometer of sentiment towards the government. In the same month we will see the introduction of The Renters Rights Act and we wait to see how tenant and landlord behaviour plays out post the implementation of the new rules. Ultimately, we believe that London house prices will stabilise in 2026 as first time buyers take advantage of historically low prices assisted by lower interest rates to become homeowners.
