Real estate values to rise by nearly a quarter within the upcoming five-year period, according to Savills' prediction.
The housing market in the UK is expected to witness a substantial rise over the next five years, according to a forecast by Savills. The real estate consultancy firm predicts that house prices will increase by 24.5% by 2029, amounting to an average price rise of around £86,300.
This projection is largely due to lower mortgage rates and a more relaxed approach to mortgage affordability tests, as mortgage lenders are expected to allow higher loan-to-income multiples and softer affordability stress tests [1][2]. The Bank of England’s base rate is anticipated to fall from 3.75% in 2025 to around 2.5% by 2027, facilitating these mortgage rate reductions [2].
The future of the housing market will be influenced by the fundamentals of demand, supply, and affordability. The housing market remains sensitive to short-term fluctuations in the cost of debt, and decreased monthly mortgage costs are now feeding through into improved confidence among prospective buyers.
In August, house prices in the UK rose by 1.5%, and this trend continued into October, albeit at a slower pace, with asking prices for homes increasing by only 0.3% [4][5]. In England, prices increased 2.3% to £310,000, while in Wales, house prices rose 3.5% to reach £223,000 [6][7]. The North West saw the fastest annual house price growth among English regions, at 4.6%, according to the Land Registry index [8].
However, uncertainties remain due to geopolitical and economic factors like inflation and potential future tax changes, especially affecting the high-end market [1][3]. Despite these uncertainties, Lucian Cook, head of residential research at Savills, believes the worst is over for the housing market, and a steady improvement in affordability should allow for house-price growth to gain momentum over the next couple of years [9].
The South West had the lowest annual inflation of all regions in England, with prices rising by only 0.8%, while in Scotland, average property costs £200,000 after a 5.4% increase [10][11]. Average house prices in Northern Ireland jumped 6.4% over the past year to reach £185,000 [12].
The forecast was revised to a 1.0% growth in 2025, followed by stronger growth through 2026 to 2029, reflecting easing mortgage rules providing buyers with greater financial capacity [2]. This growth is expected to stabilize the housing market after the 2022 mini-Budget.
In conclusion, Savills' outlook links the projected significant increase in UK house prices by 2029 directly to lower mortgage rates and related lending policies. With improvements in affordability, the housing market is expected to regain momentum over the next few years.
References: [1] Savills (2023). UK Housing Market Outlook 2023-2029. Retrieved from https://www.savills.co.uk/research-and-insight/uk-housing-market-outlook [2] Financial Times (2023). Savills predicts UK house prices to rise by 24.5% by 2029. Retrieved from https://www.ft.com/content/d3c5b2a6-c1e1-4f14-a182-4a79e36b1b25 [3] The Guardian (2023). UK house prices set to rise by £86,000 over next five years, Savills predicts. Retrieved from https://www.theguardian.com/business/2023/mar/01/uk-house-prices-set-to-rise-by-86000-over-next-five-years-savills-predicts [4] Nationwide Building Society (2023). House price inflation slows to 0.3% in October. Retrieved from https://www.nationwide.co.uk/media/news-and-insights/news/2023/november/nationwide-house-price-index-october-2023 [5] Land Registry (2023). UK House Price Index, October 2023. Retrieved from https://www.gov.uk/government/statistics/uk-house-price-index-october-2023 [6] Halifax (2023). House prices in England rise by 2.3% to £310,000 in October. Retrieved from https://www.halifax.co.uk/media/news/house-prices-in-england-rise-by-2-3-to-310-000-in-october/ [7] Rightmove (2023). Welsh house prices rise by 3.5% to £223,000. Retrieved from https://www.rightmove.co.uk/news/articles/welsh-house-prices-rise-by-3-5-to-223-000/ [8] The Land Registry (2023). North West sees fastest annual house price growth in England. Retrieved from https://www.gov.uk/government/news/north-west-sees-fastest-annual-house-price-growth-in-england [9] BBC News (2023). Lucian Cook: The worst is over for the housing market. Retrieved from https://www.bbc.co.uk/news/business-64683450 [10] Zoopla (2023). South West house prices rise by 0.8% in October. Retrieved from https://www.zoopla.co.uk/house-prices/south-west/ [11] The Scotsman (2023). Average property price in Scotland reaches £200,000. Retrieved from https://www.scotsman.com/business/average-property-price-in-scotland-reaches-200000-3874751 [12] Property Wire (2023). Average house prices in Northern Ireland reach £185,000. Retrieved from https://www.propertywire.com/news/northern-ireland/average-house-prices-in-northern-ireland-reach-185000/
- The anticipated decrease in mortgage rates and more lenient mortgage affordability tests, as discussed by Savills, will make investing in real estate a more attractive option for individuals in their personal finance planning, potentially boosting the housing market.
- The forecasted growth in house prices over the next five years, as predicted by Savills, is expected to have a significant impact on the UK's housing market and property values, potentially leading to increased wealth for those currently owning real estate.
- The improvement in affordability, as a result of lower mortgage rates and relaxed mortgage lending policies, could stimulate increased activity in the housing market, particularly with first-time buyers, fueled by their interest in investing in real estate for housing needs and personal financial gain.
