British home prices are set to surge over the next five years, with average property values expected to climb 23.4%, according to new forecasts from Savills. This could potentially create opportunities for international investors.
The projected increase would add £84,000 ($109,401) to the typical UK home price, starting with a 4% rise next year. The strongest growth is expected in Northern England, where prices could jump between 28% and 29% in regions like the North West and North East.
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“With less external noise, house prices in the medium term will be dictated by the fundamentals of demand, supply and affordability,” Lucian Cook, head of residential research at Savills, told Mansion Global.
The optimistic outlook follows recent market improvements, with the Bank of England cutting its base rate from 5.25% to 5% in August. Some mortgage rates have dropped below 4%, potentially stimulating buyer demand.
Regional variations show particular strength in northern markets. While London and the South East face some constraints due to affordability challenges, the capital’s market could benefit from increasing return-to-office trends.
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“Lower levels of homeworking and the need to return to commuter hot spots near major employment hubs has driven slightly stronger than expected performance in London over the last 12 months,” Emily Williams, Savills’ director of research, said to Mansion Global.
The forecast comes as the UK market recovers from recent challenges. Current average home prices stand at £358,000, showing 3% growth this year despite remaining 2.3% below their August 2022 peak.
Transaction volumes remain below pre-pandemic levels but are expected to reach 1.15 million by 2028. “Looking ahead, we can expect some home-movers to continue to hold off on moving until rates settle in 2027 when they also have benefited from several years of house price growth to build up equity,” Williams said.
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Market sentiment has improved following political stability and economic policy clarity under the new Labour government. With inflation expected to return to the 2% target and potential further interest rate cuts ahead, the UK housing market appears positioned for sustained growth through the decade’s end.
However, the housing supply shortage remains a key factor driving price growth.
According to the Royal Institution of Chartered Surveyors, more agents expect prices to rise as buyers return to an undersupplied market. The structural imbalance, combined with the government’s commitment to new housebuilding targets and a “Freedom to Buy” scheme for first-time buyers, suggests strong fundamentals supporting the market’s upward trajectory.
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