Activity in the prime residential market is showing early signs of stabilisation as improving mortgage conditions and greater pricing realism encourage more buyers back into the market, according to Knight Frank's latest Residential Signals report.

The consultancy said transaction levels have begun to recover following a subdued period driven by higher borrowing costs and economic uncertainty. While demand remains below long-term averages, buyer enquiries have strengthened in recent months as mortgage rates have eased and expectations around future interest rates have improved.

Knight Frank reported that sellers are increasingly pricing properties more competitively, helping to narrow the gap between buyer and seller expectations. This has supported an increase in agreed sales, although pricing growth across the prime market remains subdued as affordability continues to influence purchasing decisions.

The report also noted that the prime lettings market remains resilient, supported by limited housing supply and continued demand from tenants delaying purchases while waiting for further improvements in mortgage affordability.

Knight Frank said the outlook for the remainder of 2026 is cautiously optimistic, with lower borrowing costs expected to support a gradual recovery in activity rather than a rapid increase in prices.