The housing market has suffered its fair share of shocks over the past few years, what with pandemics, mortgage rate spikes and government intervention, most often via stamp duty holidays. Indeed, the restoration of the usual Stamp Duty Land Tax (SDLT) thresholds earlier this year resulted in the characteristic spike of activity and subsequent short-lived lull we typically expect from pre-announced tax changes. Although the second half of the year will undoubtedly be quieter, that surge of activity in Q1 means the annual transaction figure for the year will likely be higher than in 2024 or 2023.

While activity has since been more obviously driven by underlying market sentiment and fundamentals such as the cost and availability of mortgage debt, there are still likely to be a few more twists in the path ahead.

First time buyers leading the charge

The real driving force in the housing market over the past year, perhaps surprisingly, has been first time buyers (FTBs). They are the only buyer group notably above pre-Covid levels, and with a strong upward trend since early 2024. Perhaps even more surprisingly, they’ve been most active in London, with FTB numbers in the capital at the highest they’ve been since before the global financial crisis (aside from the period immediately post lockdown).

Where they have been able to raise the deposit to get on the ladder, a combination of more stable mortgage rates and strong rental growth has been a powerful incentive for many FTBs.

The lack of an alternative to Help to Buy has undoubtedly increasingly pushed them to the second-hand market, more often with recourse to the Bank of Mum and Dad.

For those less able to tap into these funds, traditional first-rung flats, which have seen weak value growth in recent years, have become relatively more affordable, with less competition from buy-to-let (BTL) investors.

As mortgage rates continue to fall and affordability stress tests are applied less aggressively, FTBs should see their buying power increase. And while reform of the rental sector will provide younger households with more security in that sector, it will do little to increase the availability of homes to rent. We therefore expect their overall numbers to remain robust over the next couple of years.

Second-stepper stall

The weaker growth in flat values has been a much greater challenge for their current owners—typically second-steppers. In prior housing market cycles, these second-steppers have been able to rely on strong value growth to build equity and fund a step up the ladder. That’s much less likely to be the case in this cycle. Many second-steppers now rely on their initial first-purchase deposit as their primary source of equity, supplemented by mortgage repayments they have made in the early years of ownership.

This has been one of the factors driving low numbers of home movers, which are still well below their levels in the 2017–19 period. A general reluctance to move when rates are expected to continue falling will have further incentivised many owners to sit on their hands.

As rates fall and their equity slowly grows, we expect mortgaged home mover numbers to trend up to just below the pre-Covid period. But we still expect them to lag behind FTBs.

Increasing confidence in the BTL market

The rental market has had no shortage of disruption, as discussed here.

And while there has been a fall in total rental stock, the overall flow of BTL mortgage lending has remained slightly more robust than we may have expected. Volumes have levelled out at only just a hair below the pre-Covid average.

This resilience in BTL lending activity is a direct result of the changing pattern of ownership. There has been a clear shift to landlords holding more properties, with smaller landlords often selling up to maintain churn in the market, despite increased stamp duty surcharges.

We expect this churn to slowly ramp up as the Renters’ Rights Act is now in effect. An introduction of minimum EPC requirements would also prompt certain landlords to sell less energy-efficient stock. Some of that may fall out of the rental market entirely, but could also be snapped up by investors who are able and willing to bring such homes up to a compliant standard. As a result, we expect Buy to let figures to slowly rise, also supported by both falling mortgage rates and rising rents. But the scale of any increase will be constrained by higher levels of rental regulation and costs of taxation.

Cash in hand

Cash buyers have enjoyed a significant competitive advantage over the past few years as high mortgage rates have held back other buyers. But this edge is eroding, and their numbers have eased, something we expect to continue until they settle at just below pre-Covid levels.

The composition of cash buyers has also been shifting, with a greater proportion of debt-free investors buying in corporate structures.

Meanwhile, an aging population should bring with it a greater number of downsizers to underpin activity among mortgage-free owner-occupiers.

_{Note: These forecasts apply to average values in the second-hand market, new build values may not move the same rate}

_{Read the other articles within Mainstream Residential Forecasts 2026–2030 below}

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Understanding the Renters’ Rights Act

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