London house prices gloom revealed but owners set for £84,000 boost
The average home in Britain will be £84,000 more valuable in five years’ time, according to a new forecast, but London house prices will grow slower than anywhere else in the UK.
Real estate giant Savills has said it expects the typical property value to reach £442,000 by the end of the period to 2029, up from £358,000 currently.
In 2025, house prices are predicted to increase by four per cent, or £14,500, on average.
However, according to figures released by JLL, house prices will rise by 20 per cent in the five years to 2029 with the firm citing that lower mortgage rates will bring buyers back to the market.
The property services firm said it had revised its forecasts for the 2025-2029 period in the wake of the Chancellor’s autumn Budget.
JLL added that it expects a lack of supply and more competitive mortgage rates to fuel house prices over the next five years, despite the government’s ambitions to accelerate housebuilding.
London house prices to grow the slowest
According to Savills, this is how much house prices will increase over the next five years:
- North West, 29.4 per cent
- North East, 28.2 per cent
- Yorkshire and the Humber, 28.2 per cent
- West Midlands, 26.4 per cent
- Scotland, 25.8 per cent
- Wales, 25.2 per cent
- East Midlands, 24.6 per cent
- South West, 21.6 per cent
- East of England, 19.9 per cent
- South East, 17.6 per cent
- London, 17.1 per cent
Confidence improving among prospective buyers
Lucian Cook, head of residential research at Savills, said: “The direction of mortgage rates has been key to buyer decisions over the past two years, and decreased monthly mortgage costs are now feeding through into improved confidence amongst prospective buyers, prompting the moderate house price growth we have seen over the past few months.
“A steady improvement in affordability should allow for house price growth to gain momentum over the next couple of years. But there is still some potential for a bumpy ride.
“The market will remain sensitive to short-term fluctuations in the cost of debt and changes to property taxation have the potential to cause some short-term disruption.”
Savills said its predictions are based on “mainstream” house prices, covering the majority of the housing market.
It added that the forecast is also based on second-hand property prices, and new-build prices could perform differently. The research involved using data from Oxford Economics and Nationwide Building Society.
Home-movers could still hold off until 2027
Emily Williams, director of research at Savills, said: “Looking ahead, we can expect some home-movers to continue to hold off on moving until rates settle in 2027, when they will have also benefited from several years of house price growth to build up equity.
“As such, there is potential for a sharp rise in activity among second- and third-steppers in the second half of our forecast period, as pent-up demand from the period of high interest rates is released.
“However, the number of first-time buyers active in the market is expected to stay below pre-pandemic levels due to a lack of any government support to replace Help to Buy, while increased regulation in the rental sector, combined with the newly-increased second home surcharge, will further dampen demand from both cash and mortgaged buy-to-let investors.”
She added: “Lower levels of homeworking and the need to return to commuter hotspots near major employment hubs has driven slightly stronger than expected performance in London over the last 12 months.
“We expect to see some residual impact of the unwinding of the ‘race for space’ in 2025, bringing growth in the South West and East of England below that of the capital.
“But beyond 2025, affordability will have the biggest influence in every region. Despite falling mortgage rates, buyers in London and the South East will still need to borrow more relative to their income, and accumulate a bigger deposit to buy, constraining house price growth.”
JLL more optimistic on house prices in the capital
According to JLL’s figures, London house prices are expected to increase by 21.6 per cent over the five-year period because of a lack of new homes going up for sale.
The firm added that it expects lower value markets to see stronger growth towards the beginning of the period, with more expensive markets outperforming as the rate cutting cycle persists into 2026 and 2027.
JLL also said that rental prices will be 17 per cent higher by the end of 2029.
Marcus Dixon, director of residential research at JLL, said: “Despite jitters in the run-up to Labour’s first Budget in 14 years, the chancellor’s announcements last week have done little to budge our headline forecasts for the residential sales and rentals markets.
“Yet challenges persist. EPC C deadlines could see landlords offloading less efficient properties or removing them from the market for retrofitting and pushing rents up further, while the Renters Right Bill could limit growth in some markets and prompt landlords to exit.
“The government is right to set out ambitious targets to both bolster housebuilding and support renters. What’s needed now is a clear roadmap for coming good on its objectives.”