The UK housing market is unlikely to recover until 2028, with higher mortgage rates linked to the conflict in the Middle East expected to deter buyers and put pressure on prices, according to property firm Savills.
Savills forecasts that average house prices will drift lower for the remainder of 2026 and decline by 1.5% in 2027. The firm says the prolonged conflict is weakening buyer confidence and delaying the prospect of mortgage rate relief.
It expects prices to begin recovering in the second half of 2028, supported by improving economic prospects and more affordable mortgages. Over the five years to 2031, Savills forecasts a 15.8% rise in house prices, equivalent to an average increase of £56,500. It expects annual growth to reach 3.5% in 2028.
Recent figures from Nationwide showed UK house prices rose by 0.5% year on year in October, their slowest annual increase in more than two years. The lender put the average property price at £273,566.
Savills expects the strongest five-year percentage growth in northern England, Wales and Scotland, citing relative affordability and economic prospects. It also forecasts that first-time buyers will lead the recovery from 2028, supported by deposit affordability and government initiatives, including the Your First Home scheme.
Emily Williams, Savills’ director of residential research, said the drawn-out conflict had postponed the prospect of meaningful mortgage rate relief, weighing on affordability and buyer sentiment. She expects activity to be subdued and prices to face pressure next year, but does not anticipate a sharper correction. Williams also noted that many homeowners have already absorbed higher borrowing costs since late 2022 and that the labour market remains resilient.
Sources: The Guardian Business.