Cautious confidence – What is next for the UK residential housing market?

As part of our recent property insight evening in London with Savills Lucian Cook, Head of Residential Research, delivered a data-driven overview of the UK housing market to a room full of property investors and intermediaries.

His message was measured: while market fundamentals are stabilising, confidence has not yet returned in full. Buyers are cautious, landlords are adjusting, and pricing is holding rather than rising.

Cook’s analysis focused on economic drag, mortgage affordability, and the underlying strength of rental demand – all signs of a market in transition, not in decline.

Here is a summary of the main themes that shaped the presentation.

The economy has calmed, but confidence has not returned

While inflation has eased and interest rates have peaked, the economic outlook remains subdued. GDP forecasts have been downgraded, and the prospect of future tax policy shifts continues to shape sentiment, especially in the prime residential market. Buyers, particularly those in higher tax brackets, are waiting for clarity – and that wait is keeping the market in a slower gear.

Mortgage affordability is easing, but not energising the market

Recent changes to stress-testing requirements have marginally improved access to mortgage finance, especially for first-time buyers. However, fixed rates remain elevated by historical standards, and the wider cost-of-living pressure has tempered demand. The affordability barrier has not disappeared it has simply softened. As a result, many potential buyers remain on the sidelines.

Landlords are rebalancing, not retreating

One of the most nuanced insights of the evening was the shifting composition of the buy-to-let market. The presentation made clear that landlords are not exiting en masse – rather, portfolios are being restructured. Smaller, more exposed investors may be reducing their holdings, but others particularly those with scale and capital – are selectively expanding. The result is not contraction, but consolidation.

Opportunity emerging in the prime markets

While mainstream values are holding steady, the prime central London market is experiencing softer demand driven by tax exposure, changes to non-dom status, and a broader lack of political clarity. Prices in some sub-markets are now materially below peak levels. For long-term buyers with a ten-year horizon, this softness may offer an opening.

The views and opinions expressed are those of the individual participants and do not necessarily reflect the official policy or position of Arbuthnot Latham.