Political uncertainty and speculation over potential property tax reforms are weighing on the UK housing market, with buyer confidence expected to remain subdued until there is greater clarity over Government policy, according to Knight Frank's latest UK Residential Market Update.

The report says UK house prices have remained relatively resilient, with Nationwide reporting annual growth of 2.2% in June 2026 and Halifax recording growth of 0.6%. However, both indices edged lower over the previous three months as higher mortgage costs and weaker seasonal demand tempered activity. Mortgage approvals in May were 14% below the five-year average, while residential transactions fell 2% between April and May 2026.

James Cleland, Head of Country Sales at Knight Frank, said: "All the metrics point towards nervousness from buyers as to what the Burnham premiership will bring and the sooner there is clarity on his policy platform, particularly in relation to property, the better."

The report also highlights the differing performance across London. Prime central London has been particularly affected, with prices down 3.6% over the year to June and transactions falling 14%, while prime outer London has proved more resilient, with prices down just 0.4% and buyer offers rising by 5%.