House prices to fall 1.5% next year before typical growth of £62,000 by 2031, upmarket estate agent predicts

Property prices across Britain will fall 1.5 per cent next year, Savills predicts. The prolonged war across the Middle East has 'delayed' mortgage-rate relief for borrowers, the upmarket estate agency warns. Further pain for borrowers could be on the way with the Bank of England poised to increase the base rate from 3.75 per cent to 4 per cent this Thursday. The base rate is expected to reach 4.25 per cent next year. However, some major lenders have cut mortgage rates this week.Savills said it did not expect house prices to 'start recovering' until the second half of 2028, and will then rise 5 per cent in both 2029 and 2030. The group said war in the Middle East was 'weighing on sentiment' and keeping mortgage rates higher for longer. It does not expect average interest rates on mortgage deals to drop below 5 per cent until early 2028. UK property prices will not start to recover until the second half of 2028, Savills said Savills said it expected zero house price growth on average across the UK this year; a 1.5 per cent, or £5,500, drop in 2027; a 3.5 per cent, or £12,500, increase in 2028; and a 5 per cent, or £18,500, increase in 2029.In the five years to 2031, Savills said it forecast average UK property prices to have risen by 15.8 per cent, or £56,500. This, Savills said, looked set to surpass income growth of 14.4 per cent and consumer prices index inflation growth over the five-year period. But in the shorter term, Savills said average property prices would continue falling this year and through 2027, resulting in a 'total peak-to-trough decline' of around 3 per cent. Transaction volumes are also set to fall as higher mortgage rates 'weigh on buyer appetite', Savills added. Emily Williams, director of residential research at Savills, said: 'The drawn-out conflict in the Middle East has pushed back the prospect of meaningful mortgage-rate relief, which will weigh on buyer sentiment and affordability.'We expect this will suppress activity and put pressure on prices next year.'She added: 'But this is unlikely to trigger a sharper correction. 'Most homeowners have already absorbed higher borrowing costs since late 2022, with relatively few still needing to refinance directly from rates below 2 per cent, and the labour market remains resilient. 'Together, these factors should keep forced sales low and limit further downward pressure on prices.' The average home has fallen by £5,314 since April, according to Nationwide Building Society's latest figures, dropping from £278,880 to £273,566. But forecasts differ. Estate agent Connells Group has said UK house prices will rise by 1.5 per cent next year followed by a 2.5 per cent increase in 2028 and a further 2 per cent rise in 2029. What will happen to house prices from 2028?Savills said it expected house price growth to 'accelerate' in the second half of 2028, reaching 3.5 per cent for the year. Oxford Economics, an advisory firm, said they expected the base rate to fall from early 2028, improving affordability and buyers' borrowing capacity. Growth is then forecast to reach 5 per cent in both 2029 and 2030 as mortgage rates bottom out and six consecutive years of income growth outpacing house price growth strengthen buyers’ purchasing power. First-time buyers are expected to lead the recovery from 2028, with deposit affordability set to improve to the best level since 2008. Savills said less stringent mortgage stress testing, relaxed restrictions on high loan-to-value lending and the Government’s new Your First Home scheme should support activity, enabling first-time buyers to overtake cash buyers as the largest buyer group by 2029.It added: 'Home mover activity is likely to remain subdued until improved affordability releases pent-up demand from 2028 onwards. 'Cash purchases are also expected to decline, while lower returns and increased regulation and higher taxation will keep buy-to-let activity below its long-term average and accelerate the shift towards larger, professional landlords.'Demand for larger family homes looks set to remain high, while building safety concerns, a glut of supply and affordability constraints will continue to dampen the popularity of flats, Savills said. Savills: Higher mortgage rates weigh on short-term outlook for property prices 2026 2027 2028 2029 2030 2031 5 years to 2031 UK house price growth (%) 0% -1.5% 3.5% 5% 5% 3% 15.8% UK house price growth (£) £5,500- £12,500+ £18,500+ £19,000+ £12,000+ £56,500+ CPI inflation 3.7% 2.4% 1.4% 1.9% 1.9% 1.9% 9.8% Bank of England base rate (at year end) 4% 4.25% 3.25% 3% 3% 3% - Assumed average mortgage rate (at year end) 5.32% 5.09% 4.23% 4% 4% 4% - Real GDP growth 1.3% 0.7% 1.8% 1.8% 1.7% 1.6% 7.8% Nominal income growth 2.7% 2.2% 2.8% 2.9% 2.9% 2.8% 14.4% Which locations will see strong house price growth from 2028?Savills said the strongest five-year house price growth would be seen across the north of England, Wales and Scotland, buoyed by 'relative affordability and economic prospects'. It added: 'In the three northern regions, average house prices remain below six times average earnings. 'In London, this figure is 11.3, meaning buyers either need above-average incomes or very large deposits to get on the ladder.'Property prices in cities like Bristol, Leeds, Liverpool and Manchester look set to rise strongly in the coming years, Savills said. But London's market is expected to experience a recovery in house prices too. Savills said: 'Prime London is expected to outperform later in the forecast period, supported by improved value following several years of price declines.' How to find a new mortgage Mortgage rates have jumped as conflict with Iran has driven up inflation expectations and dashed hopes of interest rate cuts.If you need a mortgage because you are buying a home, or your current fixed rate deal is due to end, you should explore your options as soon as possible. This is Money has a long-standing partnership with fee-free broker L&C, to provide you with expert mortgage advice.Use This is Money and L&Cs best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs.Or use L&C’s online Mortgage Finder to search thousands of deals from more than 90 different lenders to discover the best deal for you.Mortgage service provided by London & Country Mortgages (L&C), which is authorised and regulated by the Financial Conduct Authority (registered number: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage