By Karim Hammam
Britain's housing market recovery is expected to be delayed until the second half of 2028 as elevated mortgage rates continue to pressure activity and prices, according to a new forecast from property firm Savills. The company projects house prices will rise by 15.8% — or £56,500 in cash terms on average — over the five years to 2031, with values beginning to recover from late 2028.
Price Declines Expected Through 2027
Savills anticipates house prices will drift lower over the remainder of 2026 and through 2027, resulting in a peak-to-trough decline of around 3.0%. 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. Emily Williams, director of residential research at Savills, said the drawn-out conflict has pushed back meaningful mortgage rate relief, suppressing activity and putting pressure on prices next year.
Recovery Projected From Late 2028
Improving economic prospects and mortgage affordability are expected to support a recovery from 2028, led by first-time buyers helped by deposit affordability and government initiatives. House price growth is forecast to accelerate during the second half of 2028, reaching 3.5% for the year, then 5.0% in both 2029 and 2030, before moderating to 3.0% in 2031. Williams noted most homeowners have already absorbed higher borrowing costs since late 2022, with relatively few still needing to refinance from rates below 2%, and the labour market remains resilient, keeping forced sales low.
Regional Variations Highlight Northern Growth
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. Savills expects markets combining affordability with strong employment and investment prospects to outperform, including Manchester, Leeds, Liverpool and Bristol, alongside well-connected commuter locations. Regional projections show the North West leading with 23.3% growth (£62,000), followed by the North East at 22.2% (£45,500), Scotland at 21.6% (£53,500), and Wales and Yorkshire and the Humber both at 21.0%.
Demand Shifts Toward Larger Family Homes
Changing buyer demographics and flexible working patterns will continue to support demand for larger family homes, according to Dan Hill, residential research associate at Savills. Property type remains an important driver of performance, with bigger homes expected to see sustained demand as buyer preferences evolve.
