UK housing market set for slower growth

Savills has revised its initial house price forecast from November, which anticipated a moderate growth of 23.4% over the five years leading up to 2029. 

Housing

This was largely based on expectations of falling interest rates and improved market confidence, although transaction volumes were projected to remain below average.
While some of the initial assumptions, such as the decline in interest rates, have materialized as anticipated, the global landscape has become more uncertain. Geopolitical instability, highlighted by trade tensions and heightened international conflicts, has increased. Coupled with a sluggish start to buyer activity despite improved affordability following Stamp Duty relief changes in March, the housing market is delicately balanced.
Nationwide's data shows annual house price growth slowing to 2.1% in the year to June, down from 4.7% in December 2024, with volatile monthly figures. Consequently, Savills has revised our 2025 UK house price forecast downwards to 1.0%, anticipating buyer caution ahead of the Autumn Budget due to concerns about public finances.
Savills anticipates the higher end of the market to be particularly sensitive to potential tax increases. However, the property advisor remains optimistic about the broader market's prospects for recovery over the forecast period. Expected base rate cuts by Oxford Economics, totaling 175 basis points by the end of 2027, should improve mortgage affordability. Eased mortgage regulations, including the affordability stress tests and loan-to-income ratio limits, are also likely to stimulate transaction volumes by making it easier for first-time buyers to secure mortgages.
Despite slightly weaker overall GDP growth expectations, a projected economic strengthening in 2027-2029, combined with wage growth exceeding 22% over the five years, should bolster buyer confidence and encourage them to capitalize on favorable mortgage conditions. As a result, Savills expects transaction numbers to approach the post-Global Financial Crisis average of 1.2 million per year by 2027.