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Expectations for house price growth this year have been lowered due to broader global uncertainties, according to a recent forecast. However, property firm Savills has upgraded the potential for house price growth over the next five years, attributing this to a more lenient approach to mortgage affordability tests.
The firm anticipates that house prices across Britain will increase by an average of 1.0% this year and by 24.5% over the next five years. It had previously predicted a 4.0% increase this year and a 23.4% rise over the next five years.
Savills explained that recent economic and geopolitical uncertainty has resulted in a weaker first half of 2025 than initially expected. The firm also noted that market activity in 2025 was complicated by buyers’ reactions to changes in stamp duty, which led to a surge in activity early in the year as buyers rushed to beat the deadline. Stamp duty is applicable in England and Northern Ireland.
However, many mortgage lenders have recently made changes that could potentially allow people to borrow more. Savills believes that this more relaxed approach to mortgage affordability tests should bolster both house prices and the number of house sales.
Based on its revised forecast, Savills expects the average house price to increase by £86,300 by 2029. It predicts an average house price of £448,600 by the end of 2029, up from an average of £362,300 by mid-2025.
Lucian Cook, head of residential research at Savills, said: “Interest rates have fallen as expected, giving buyers a bit more financial capacity than they had a year ago. But a lot has changed over the last six months. Greater geopolitical uncertainty – including tariffs and trade wars – has made predicting the precise path of further cuts more challenging.”
Savills said it expects concerns over the prospect of future tax increases to weigh most heavily on the top end of the market. Mr Cook continued: “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.”
House sales across 2025 are projected to reach 1.04 million by the year’s end, in line with previous forecasts. While elevated supply levels may temper price growth, Savills said that it maintains a positive outlook for 2025 overall despite the slow start.
Emily Williams, director of research at Savills, said: “We anticipate that buyer demand will pick up heading into early autumn, particularly among first-time buyers and mortgaged home movers, driven by an expected base rate cut in August and a more competitive mortgage market.”
Land Registry and Nationwide Building Society data were used for part of the research.
Here is the revised house price forecast from Savills for growth over the five-year period between 2025 and 2029:
- West Midlands, 27.6%
- North East, 26.4%
- South East, 20.4%
- South West, 20.4%
- East Midlands, 20.3%
- East of England, 19.2%
- London, 15.3%
- North West, 31.2%
- Scotland, 29.4%
- Wales, 28.2%
- Yorkshire and the Humber, 28.2%
