ESPC predicts strong 2026 property market

Paul Hilton, CEO of ESPC, shares his insights into what he expects for the housing market in 2026.

2025 certainly reminded us that the property market rarely follows a predictable path. While we saw healthy activity through much of the year, the final quarter brought an unexpected lull as Westminster budget uncertainty caused buyers and sellers alike to pause and take stock. Rather than viewing this as weakness, I believe we're looking at significant pent-up demand that will fuel a strong start to 2026. After all, people still need to move - they're just choosing their timing more carefully.

Interest rates: The game-changer for 2026

The Bank of England's recent base rate reduction has already begun to shift sentiment, and I expect this is just the beginning. We anticipate further cuts throughout 2026, with Goldman Sachs boldly predicting rates could reach 3% by summer—a level we haven't seen since 2022. This would be transformative for buyer confidence and affordability across Scotland.

Lower borrowing costs will unlock movement right across the market, but particularly for first-time buyers and those looking to upsize who have been waiting on the sidelines. Combined with wage inflation continuing to outstrip house price growth - currently running at 4.6% compared to our predicted 3.5% property price increase - 2026 could see real improvements in affordability for many households.

A healthy market ahead

Despite the slower pace to Q4 2025, I'm optimistic about 2026. We expect sales prices to continue rising in the region of 3.5%, supported by plenty of demand. The year will likely start strongly as that pent-up demand translates into action, giving buyers more choice and keeping prices steady. Sellers will continue to command a small premium, though the days of routine 10-20% over Home Report valuation remain firmly in the past.

Political landscape: Watching and waiting

The Scottish Budget, delayed until 13 January 2026 due to Westminster's late timing, may shape broader economic planning. However, following the UK Budget's minimal impact on housing activity last year, I anticipate a similarly steady approach from the Scottish Government with no major disruptions expected at this pivotal time.

The bigger political question mark is the May 2026 Scottish Parliamentary elections. The run-up to polling day may cause some buyers and sellers to delay decisions until results are known and policies become clearer. I expect we'll see a summer boost to the market following the elections as clarity and confidence return—much like the release of pent-up demand we're anticipating at the start of the year.

For those of us in the industry, the elections present an opportunity for meaningful LBTT reform and increased support for first-time buyers in high-price areas. Longer-term, legislation like the Heat in Buildings Bill - currently paused and due to be re-tabled after the May elections - may eventually impact homeowners and buyers, while the council tax review could affect property running costs.

A shifting dynamic: Fall-throughs and buyer selection

One trend that grew throughout 2025 - and unfortunately I expect will continue into 2026 - is the number of properties returning to market after sales fail to proceed. This is currently sitting at around 10%, up from 7% in 2021. This is reshaping how sellers approach buyer selection, with many now looking beyond just the highest offer to factors like chain position and mortgage certainty. This shift could introduce more favourable conditions for first-time buyers, who bring certainty as chain-free purchasers and will be pivotal in keeping property chains moving.

First-time buyers: A year of opportunity

I'm particularly encouraged by the outlook for first-time buyers in 2026. The combination of falling interest rates, improving wage-to-house-price ratios, and sellers valuing certainty over maximum price creates a genuinely positive environment for those taking their first step onto the property ladder.

More accessible mortgage products and improved long-term affordability projections should bring more first-time buyers into the market. These buyers aren't just benefiting from better conditions—they're becoming essential to market health, keeping chains moving and unlocking properties for growing families further up the ladder.

This audience remains close to our hearts at ESPC, and we're committed to supporting first-time buyers with the tools, advice, and exclusive early access to properties that can make all the difference in competitive situations.

Balancing optimism with reality

Of course, it would be naive to ignore the warning signs on the horizon. Discussions of recession persist, with unemployment creeping upward and job applications reaching levels not seen since 2019. These economic headwinds could impact buyer confidence and purchasing power, particularly if businesses pass on increased costs from higher minimum wages and National Insurance contributions.

Regional outlook: Strength across the board

Across the regions ESPC serves, early signs of increasing interest are already emerging. Edinburgh is expected to see steady price growth supported by robust demand. The Lothians will benefit from buyers seeking space and value near the capital, while Fife may see particular uplift as improved affordability encourages first-time buyers and second-steppers. In the Scottish Borders, lifestyle-driven moves remain strong, and Dumfries & Galloway is positioned to attract relocators seeking affordability and quality of life.

Looking ahead with confidence

It's a big year with plenty happening - from elections to policy decisions to economic uncertainty. But one thing remains certain: the property market in Edinburgh, the Lothians, Fife, the Scottish Borders, and Dumfries & Galloway is fundamentally resilient. We are in the midst of a national housing emergency, and demand for property will remain strong.

I firmly believe that with interest rates falling, affordability improving, and pent-up demand waiting to be released, 2026 will be a healthy year for the Scottish property market. There will be bumps along the way - there always are - but the underlying fundamentals point toward a year of steady, sustainable activity.