Savills has reduced its projection for house price growth over the coming two years as uncertainty dampens the housing market, though anticipates relaxed mortgage regulations will stimulate activity in the medium term.
The property giant lowered its prediction for house price growth in 2025 from four per cent to one per cent, and its 2026 projection from 5.5 per cent to four per cent, as reported by .
"A lot has changed over the last six months," Lucian Cook, head of residential research at Savills, said. "Greater geopolitical uncertainty – including tariffs and trade wars – has made predicting the precise path of further cuts more challenging.
"In light of [slowing house price growth] and the potential for more buyer uncertainty in the run up to the autumn Budget, we have revised our house price forecast for this year," he added.
Savills anticipates worries over the possibility of future tax rises to impact most severely on the premium end of the market, which has been notably subdued this year.
There's also the effect of interest rates, which have proved more persistent than anticipated as inflation remains above the Bank of England's preferred level.
"Higher than expected inflation in the º£½ÇÊÓƵ is making policymakers cautious when it comes to further base rate cuts.
"While we have forecast based on the scenario described, there are ongoing risks in both directions which have the potential to disrupt the housing market," Dan Hill, research analyst at Savills, said.
Savills upgrades five-year forecast
Savills upgrades five-year forecast Despite short-term caution, more accessible mortgages are expected to stimulate growth from 2027 onwards.
"Recent easing of mortgage regulations, including more flexibility on affordability stress tests and higher allowances for loans above 4.5 times income, is likely to boost transaction volumes, particularly by helping more first-time buyers get on the ladder," Cook stated.
Savills anticipates that by 2027, transaction numbers will near the post-financial crisis norm of 1.2 million per annum.
The firm has forecasted that the average º£½ÇÊÓƵ house price will increase by 24.5 per cent by 2029, up from its previous prediction of 23.4 per cent.
Following a change in Bank of England guidance in March, lenders are no longer required to stress test borrowers at the Standard Variable Rate plus 1 per cent.
Several lenders have already adjusted their mortgage requirements in response to the Bank of England's change.
Chancellor Rachel Reeves has planned a new "Freedom to Buy" schemes, which will make 95 per cent mortgages permanent, supported by a government-backed guarantee for lenders.
London to see slowest growth in º£½ÇÊÓƵ
London house prices are predicted to remain flat this year, and rise by just 15 per cent by 2029.
This is less than half the rate of the North West, which is set to be the fastest-growing area in terms of value.
While London's property prices surged post-financial crisis, other º£½ÇÊÓƵ regions have been gradually catching up in recent years due to their relative affordability attracting buyers away from the capital.
According to Rightmove's most recent house price index, Inner London prices dipped by 2.1 per cent month on month in July, while overall prices in the capital decreased by 1.5 per cent.
Rightmove also highlighted that the stamp duty increase in April, which abolished stamp duty relief for first-time buyers, has impacted buyer affordability.
The median first-time house purchase exceeded the threshold for paying stamp duty in April, meaning the average buyer had to fork out an additional £6,250 – a sum only 15 per cent of first-time buyers in London can afford, as per a survey from Fairview Homes.
Sellers who postponed moves due to market uncertainty have also re-entered the market, resulting in a surge in supply.
This mix of price-sensitive buyers and an abundance of properties for sale has stagnated house price growth in the capital, a trend unlikely to reverse in the near future.
