The dominant risk to this outlook is geopolitical rather than domestic. The war in the Middle East and its effect on energy prices will largely decide whether the UK economy avoids recession, with the closure of the Strait of Hormuz representing the largest oil supply shock in history.
As a result, inflation is the other key pressure point. Consumer price inflation is expected to rise to around 3.7% in 2026, driven largely by energy costs feeding through the system. This has complicated the Bank of England's path: rates look set to hold around 3.75% through 2026 rather than resume cutting as previously expected, though some forecasters still see room for cuts if inflation cools as base effects dissipate.
Overall, the picture is one of a UK economy muddling through — avoiding recession in most scenarios, but with growth well below pre-financial-crisis norms, and inflation and geopolitics as the main swing factors to watch.
The housing market outlook for the rest of 2026 has softened notably from earlier optimism. Forecasts made at the start of the year pointed to modest but steady price growth of around 2–4%, but the escalation of the Middle East conflict and the resulting rise in mortgage rates have prompted several forecasters to cut their numbers sharply.
The development land market is similarly cautious. Sentiment has weakened, particularly among smaller housebuilders delivering fewer than 75 homes a year, with fewer bids for sites coming to market, and brownfield land values now sit around 17% below their 2022 peak, which reflects Building Safety costs and waning buyer appetite for flats. Conversely, Greenfield land is holding up better thanks to constrained supply.
Planning reform remains the medium-term bright spot. A more relaxed planning environment and the Planning and Infrastructure Bill are expected to improve the supply of consented land, though developers have so far struggled to capitalise on this due to weak sales demand. Grey belt sites near transport links are attracting increasing interest, and housebuilding completions are still expected to grow this year, even as near-term sentiment stays subdued.
On balance, the revised National Planning Policy Framework should also be positive for well-located strategic and station-adjacent land, and for brownfield/vacant-building schemes. That said, it only landed a week ago, and there's an inevitable lag before decision-makers, landowners and lenders settle on how to interpret the new S3–S5 decision making framework — so expect a period of caution and interpretive disputes before the more favourable elements translate into higher land values or transaction volumes.
In short: near-term caution, with medium-term optimism resting on planning reform, potential rate cuts, and geopolitical stabilisation.
