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A recovery in Britain’s housing market is set to be delayed until 2028 as mortgage rates put pressure on activity and prices, according to a forecast.
Property firm Savills said it expects house prices to rise by 15.8% – or £56,500 in cash terms on average – over the five years to 2031, with values starting to recover from the second half of 2028.
The strongest five-year house price growth in percentage terms is forecast across northern England, Wales and Scotland, supported by relative affordability and economic prospects, according to the prediction.
Savills also said that changing buyer demographics will support demand for bigger family homes.
It expects house prices to drift lower over the remainder of 2026 and through 2027, resulting in a “peak-to-trough” decline of around 3.0%.
The firm said that average mainstream house prices are forecast to fall by 1.5% across 2027, as the prolonged conflict in the Middle East weighs on sentiment and keeps mortgage rates higher for longer.
However, improving economic prospects and mortgage affordability are expected to support a recovery from 2028.
Emily Williams, director of residential research at Savills said: “The drawn-out conflict in the Middle East has pushed back the prospect of meaningful mortgage rate relief, which will weigh on buyer sentiment and affordability.
“We expect this will suppress activity and put pressure on prices next year.
“But this is unlikely to trigger a sharper correction.
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“Most homeowners have already absorbed higher borrowing costs since late 2022, with relatively few still needing to refinance directly from rates below 2%, and the labour market remains resilient.
“Together, these factors should keep forced sales low and limit further downward pressure on prices.”
Savills expects first-time buyers to lead the recovery from 2028, helped by deposit affordability and government initiatives.
House price growth is expected to accelerate during the second half of 2028, according to Savills, reaching 3.5% across the year.
House price growth is then forecast to reach 5.0% in both 2029 and 2030, with a 3.0% increase in 2031.
Dan Hill, residential research associate at Savills said: “Markets combining relative affordability with strong employment and investment prospects are expected to outperform, including Manchester, Leeds, Liverpool and Bristol, alongside well-connected commuter locations offering better value than their surrounding regions.
“Property type will also remain an important driver of performance.
“Demand for larger family homes continues to be supported by flexible working patterns and changing buyer demographics.”
Here are the cash changes in the average house price expected by Savills in the years ahead:
2027, minus £5,500
2028, plus £12,500
2029, plus £18,500
2030, plus £19,000
2031, plus £12,000
And here are the overall percentage increases in average house prices predicted by Savills in percentage and cash terms over the years to 2031:
London, 8.1%, £60,000
South East, 9.1%, £38,000
East of England, 10.7%, £38,500
South West, 13.5%, £44,500
East Midlands, 15.7%, £41,500
West Midlands, 16.3%, £47,000
Yorkshire and the Humber, 21.0%, £53,000
Wales, 21.0%, £43,500
Scotland, 21.6%, £53,500
North East, 22.2%, £45,500
North West, 23.3%, £62,000
