UK property prices are forecast to fall by 1.5% in 2027, a drop of approximately £5,500, according to predictions from upmarket estate agent Savills. This downturn is attributed in part to the ongoing conflict in the Middle East, which has reportedly delayed anticipated relief from high mortgage rates.
The Bank of England is expected to raise its base rate from 3.75% to 4% imminently, with further increases to 4.25% anticipated next year. Despite this, some major lenders have begun to cut mortgage rates. Savills does not expect property prices to begin their recovery until the latter half of 2028, projecting a 3.5% increase for that year, followed by 5% growth in both 2029 and 2030.
Overall, Savills forecasts that average UK property prices will rise by 15.8%, or about £56,500, in the five years leading up to 2031. This projected growth outpaces the expected income growth of 14.4% and consumer price index inflation over the same period. However, the short-term outlook indicates a total peak-to-trough decline of around 3% in average prices, with transaction volumes also expected to decrease due to reduced buyer appetite.
Emily Williams, director of residential research at Savills, noted that the prolonged conflict in the Middle East is suppressing buyer sentiment and affordability, putting pressure on prices in the near term. However, she does not anticipate a sharp market correction, citing that most homeowners have already absorbed increased borrowing costs and the labor market remains resilient, limiting forced sales.
Recovery and Growth Outlook
From 2028, Savills anticipates an acceleration in house price growth. This recovery is expected to be led by first-time buyers, supported by improving deposit affordability, less stringent mortgage stress testing, relaxed loan-to-value restrictions, and government schemes. By 2029, first-time buyers are projected to surpass cash buyers as the largest group of purchasers.
Savills also predicts that the north of England, Wales, and Scotland will experience the strongest five-year house price growth, driven by relative affordability and improving economic prospects. Cities like Bristol, Leeds, Liverpool, and Manchester are highlighted for significant growth, while prime London property is expected to recover later in the forecast period.