Savills predicts UK housing market recovery not until 2028

Savills said the UK housing market is unlikely to see a turnaround until 2028, as elevated mortgage rates tied to the ongoing Middle East war are dampening buyer confidence. The firm projects average house prices to fall modestly in 2027, with a 1.5% decline expected after a gradual dip through the remainder of 2026. It anticipates a 15.8% rise – about £56,500 – in average prices over the five years to 2031, with growth beginning in the latter half of 2028.

Nationwide reported that UK house prices rose by just 0.5% in October, the slowest annual increase in over two years, with the average property price at £273,566. The Bank of England is expected to raise its policy rate from 3.75% to 4% on Thursday, adding pressure to mortgage costs after inflation reached 3.5% in September. More than 2.3 million households are projected to face higher mortgage payments when fixed-rate deals expire in 2027.

"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," said Emily Williams, director of residential research at Savills. "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."

Savills also noted that the strongest five-year price growth is forecast for northern England, Wales and Scotland, driven by relative affordability and positive economic outlooks in those regions.