“Housing is technically more accessible now than at any point in the last three years, thanks to lower mortgage rates, lower real house prices and looser mortgage regulation. But none of this matters unless buyers feel confident enough to commit – and weaker sentiment is holding back transactions”
– Emily Williams – Savills
Savills has forecast that average UK house prices will increase by £80,000, or 22.2%, over the next five years, reflecting a slow recovery in the mainstream housing market. The forecast expects growth of 2% in 2026, equivalent to £7,200, before accelerating in the later years of the period.
The housing market has remained subdued in 2025, weighed down by weaker buyer sentiment and concerns over the economy and tax environment. Relatively high supply has been set against softer demand, creating a buyer’s market and limiting upward pressure on prices, although values have grown 0.5% so far this year, according to Nationwide. Savills expects both demand and price growth to remain modest through early 2026.
“Our previous forecast assumed falling interest rates would boost borrowing and investment, supporting house price growth. However, with inflation stuck at 3.8%, economists are less confident about the pace in which rate cuts will happen. Higher interest and mortgage rates next year, as well a weaker labour market, with a slight rise in unemployment and slowing wage growth, are likely to constrain price growth,” said Lucian Cook, head of residential research at Savills.
He added, “The upcoming Budget also continues to weigh on the market, although we expect any announcements to have a much greater impact on prime values and transactions than the mainstream market. Direct changes to transactional taxes could alter the incentives that currently shape buyers’ housing decisions, while broader tax increases on certain population segments could reduce some prospective buyers’ capacity to finance home purchases. Ultimately, however, the biggest influence on the mainstream market will come from how financial markets react to the Budget itself.”
Better times ahead
Over the longer term, interest rate cuts, though slower than expected, are likely to support demand and price growth. Relaxed mortgage rules introduced earlier this year will allow some buyers to borrow more relative to their incomes, while broader economic forecasts suggest low inflation, rising GDP, falling unemployment, and an undersupply of homes will sustain real price growth.
Savills predicts house prices will peak at 5.0% growth in 2028 and 5.5% in 2029, with values expected to grow in real terms from 2028 for the first time since the end of 2022. The top-performing regions over the five-year period are forecast to be Yorkshire & Humber, the North East, Scotland and Wales, with growth exceeding 27%.
First-time buyers to drive activity
Transaction volumes are expected to dip in 2026 following this year’s boost from stamp duty changes, but improved affordability is likely to increase activity toward the pre-pandemic norm of 1.2 million transactions.
“Housing is technically more accessible now than at any point in the last three years, thanks to lower mortgage rates, lower real house prices and looser mortgage regulation,” said Emily Williams, director of research at Savills. “But none of this matters unless buyers feel confident enough to commit – and weaker sentiment is holding back transactions.”
First-time buyers remain the most active group, benefiting from improved purchasing power. Slower price growth for flats is limiting equity gains for second-steppers, though activity is expected to rise as mortgage rates fall. Buy-to-let transactions are being sustained by smaller landlords selling to larger investors, a trend likely to continue once the Renters’ Rights Bill comes into force, although tighter regulation and taxation may limit expansion in this sector.
Regional variation
Regional house price growth is expected to follow affordability patterns, with northern and Scottish markets continuing to outperform the UK average. “Regional performance is largely influenced by where we are in the housing market cycle. Since 2016, we’ve been in the second half of the cycle, where the more affordable regions in the North and Scotland outperform the UK average, and capacity for growth in London and the South is more limited,” said Dan Hill, research analyst at Savills.
By the end of the forecast period, values in the North West are expected to sit 15% below the UK average, narrowing from nearly 30% a decade earlier. London prices are projected to be 33% above the UK average, down from 70% in 2017, creating potential for renewed outperformance in the 2030s.