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 from property firm Savills.
Savills 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.
Regional Growth Forecast
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.
Near-Term Decline Expected
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.
Market Resilience
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.
“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.”
Recovery Outlook
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.”
Cash Changes and Regional Performance
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
These forecasts indicate that while the market faces near-term pressure, a sustained recovery is expected to begin in the second half of 2028, with regional variations playing a significant role in the overall trajectory.
