In the next five years, UK house prices are expected to increase significantly, according to a forecast by Savills.
- The projection anticipates an average rise of £84,000 in house prices, driven by declining interest rates and stabilising inflation.
- Confidence in the market is expected to grow as more competitive mortgage rates become available.
- Regions such as the North and Scotland may experience faster growth compared to pricier areas like London.
- Savills foresees steady recovery in the housing market, despite potential fluctuations due to changes in debt costs and property taxation.
UK house prices are poised for considerable growth over the next five years, with Savills forecasting an average increase of £84,000. This optimistic projection is underpinned by expected declines in interest rates and stabilising inflation figures, which are predicted to help the housing market regain momentum after previous constraints.
The advisory firm predicts that house prices will rise by 23.4% by 2029. In the immediate future, a 4% increase is anticipated for the next year, as inflation levels fall to around 2% and interest rates trend downwards. This improvement is likely to boost market confidence, with more competitive mortgage rates enticing prospective buyers.
Currently, the base rate stands at 4.75% but is expected to decrease to 2% by 2027. Similarly, average mortgage rates are foreseen to drop from 4.56% to 2.64%. As a result, prospective buyers are likely to experience reduced monthly costs, thus increasing their confidence in making purchases.
Lucian Cook, head of residential research at Savills, highlights the influence of mortgage rates on buyer decisions. He notes that decreasing rates have played a crucial role in boosting market confidence. However, he cautions that short-term volatility due to debt cost fluctuations and possible changes in property taxation could affect price trends.
Savills anticipates a gradual recovery in home mover activity, projecting up to 1.15 million transactions by 2028. The recovery is expected to be uneven across different regions and demographics, with second- and third-time movers driving much of the increase due to accumulated home equity and favourable borrowing conditions.
Emily Williams, director of research at Savills, explains that while these buyers will contribute significantly to market recovery, first-time buyers may lag behind pre-pandemic levels. The end of government initiatives like Help to Buy, coupled with stricter regulations, is expected to continue affecting rental and buy-to-let sectors.
In terms of regional growth, more affordable locations such as the North and Scotland are forecasted to experience more rapid increases in house prices—up to 29.4% over five years—compared to areas like London and the South East, where growth will be slower due to ongoing affordability challenges.
Despite a previous 10.5% decline in real-term prices since their peak in August 2022, the market is set for a turnaround, with Savills predicting a five-year return to price growth. The projected 11% real appreciation in house prices by 2029 suggests a recovery to levels seen before the economic impacts of recent governmental budgets.
The forecast by Savills suggests a positive outlook for UK house prices, with anticipated growth influencing market dynamics over the next five years.
