Savills has downgraded its outlook for the UK housing market, forecasting that mainstream house prices will fall by 2% in 2026 as higher mortgage costs continue to weigh on buyer demand and affordability.
The revised forecast points to a softer near-term market than previously expected, with elevated borrowing costs expected to limit transaction levels and constrain price growth over the coming months.
However, Savills believes the slowdown will be temporary rather than structural. The agency expects improving economic conditions and a gradual easing of affordability pressures to support a return to growth over the medium term.
Over the five years to 2030, Savills now expects mainstream UK house prices to rise by 18.5%. While that represents a downgrade from its previous forecast of 22.2%, the outlook still points to steady long-term growth once financing conditions begin to improve.
| 2026 | 2027 | 2028 | 2029 | 2030 | 5 years to 2030 | |
| UK house price growth | -2.0% | 2.5% | 5.0% | 6.0% | 6.0% | 18.5% |
| CPI inflation | 3.9% | 1.9% | 1.9% | 2.0% | 2.0% | 12.2% |
| Bank of England base rate (at year end) | 3.75% | 3.50% | 3.00% | 2.75% | 2.50% | – |
| Assumed average mortgage rate (at year end) | 4.78% | 4.34% | 3.98% | 3.71% | 3.50% | – |
| Real GDP growth | 0.7% | 0.7% | 1.8% | 1.7% | 1.4% | 6.5% |
Source: Savills using Oxford Economics, Bank of England
Savills said the outlook for the housing market has deteriorated in recent months following geopolitical instability in the Middle East and the knock-on impact on inflation and mortgage pricing.
Higher energy prices have contributed to inflationary pressures, prompting mortgage rates to move higher and reducing the availability and affordability of borrowing for households.
Against that backdrop, the agency believes buyer demand will remain under pressure in the short term and has revised its mainstream house price forecast for 2026 from growth of 2% to a decline of 2%.
Savills said affordability constraints are once again becoming the main factor shaping market activity, with higher financing costs expected to limit both transaction volumes and price growth until borrowing conditions improve.
“Despite a robust start to the year for both price growth and activity, the rise in mortgage rates since late February has downgraded the short-term outlook. Higher borrowing costs and weaker sentiment will weigh on demand through the remainder of 2026,” said Lucian Cook, head of residential research at Savills.
“At the same time, lower demand is being set against elevated levels of stock – partially from landlords selling up in the face of greater regulation, which will place downward pressure on prices, particularly across submarkets in London and the South East.”
“However, several factors will cushion the impact of these headwinds. Affordability is less stretched now, compared with 2022, following a slower recovery in prices. While stricter mortgage regulation and the widespread use of fixed-rate mortgages continue to keep the risk of forced sales low. Overall, this points to a modest adjustment in nominal house prices, with the greatest pressure likely to come over the summer as interest rates peak.”
The main risk to this outlook is that a more protracted conflict in the Middle East leads to a sharper rise in inflation and, in turn, interest rates. Savills expects this would result in a more significant short‑term pressure on house prices, followed by a more pronounced V‑shaped recovery.
Reasons for optimism in the medium term
Savills expects the most significant pressure on prices to come over the summer when rates are expected to be at their highest. The property firm expects recovery to begin slowly in 2027, before an improved outlook allows prices to grow more strongly over the remainder of the forecast period.
Over the five years to 2030 Savills expects average house prices to increase by 18.5% or £67,000.
North and devolved nations expected to outperform
Savills forecasts the North of England, Scotland and Wales to outperform during the period of higher mortgage rates, reflecting their stronger affordability cushion. Further South, Savills anticipates houses will outperform flats, amid continued caution from buyers around leasehold and building safety concerns.
“Regional performance continues to be shaped by affordability. More affordable markets tend to be more resilient when borrowing costs rise, and we expect that to underpin outperformance across parts of the North, Scotland and Wales while mortgage rates remain elevated,” comments Dan Hill, research analyst at Savills.
| Region | 2026 | 2027 | 2028 | 2029 | 2030 | 5 years to 2030 |
| UK | -2.0% | 2.5% | 5.0% | 6.0% | 6.0% | 18.5% |
| London | -4.0% | 1.0% | 3.5% | 5.0% | 5.0% | 10.6% |
| South East | -3.5% | 1.5% | 4.0% | 5.5% | 5.5% | 13.4% |
| East of England | -3.5% | 2.0% | 4.0% | 5.5% | 5.5% | 13.9% |
| South West | -2.5% | 2.5% | 5.0% | 6.0% | 6.0% | 17.9% |
| East Midlands | -2.5% | 3.0% | 5.5% | 6.0% | 6.0% | 19.0% |
| West Midlands | -2.0% | 3.0% | 5.5% | 6.0% | 6.0% | 19.7% |
| North East | 0.0% | 3.5% | 6.0% | 6.5% | 6.0% | 23.9% |
| Yorks & Humber | 0.0% | 3.5% | 6.5% | 6.5% | 6.5% | 25.0% |
| North West | 0.0% | 3.5% | 6.5% | 6.5% | 6.5% | 25.0% |
| Wales | -0.5% | 3.0% | 6.0% | 6.5% | 6.5% | 23.2% |
| Scotland | -0.5% | 3.0% | 5.5% | 6.5% | 6.5% | 22.6% |
Source: Savills Research
Property industry reacts to latest Nationwide house price data
Read the orginal article: https://propertyindustryeye.com/savills-revises-its-five-year-house-price-forecast/?utm_source=rss&utm_medium=rss&utm_campaign=savills-revises-its-five-year-house-price-forecast
