Average mainstream house prices will grow just 2% next year says Savills – well below the current inflation rate.
The five-year mainstream house price forecast expects average house prices to increase by 2% in 2026 (previously 4%), or £7,200 and by 22.2% by the end of the five years to 2030.
The high end agency says sentiment and concerns about the economy and tax environment have left the housing market subdued over 2025.
Relatively high levels of supply have been set against weaker demand (according to RICS), creating a buyer’s market in which upwards pressure on prices has been limited, although values have remained steady, growing 0.5% so far in 2025 (according to Nationwide).
Savills forecast expects that both demand and price growth will be fairly slow for the rest of this year and into early 2026 as well.
“Our previous forecast assumed falling interest rates would boost borrowing and investment, supporting house price growth. However, with inflation stuck at 3.8%, economists are less confident about the pace in which rate cuts will happen. Higher interest and mortgage rates next year, as well a weaker labour market, with a slight rise in unemployment and slowing wage growth, are likely to constrain price growth,” comments Lucian Cook, head of residential research at Savills.
“The upcoming Budget also continues to weigh on the market, although we expect any announcements to have a much greater impact on prime values and transactions than the mainstream market.
“Direct changes to transactional taxes could alter the incentives that currently shape buyers’ housing decisions, while broader tax increases on certain population segments could reduce some prospective buyers’ capacity to finance home purchases.
“Ultimately, however, the biggest influence on the mainstream market will come from how financial markets react to the Budget itself.”
Over the longer term, while the pace of interest rate cuts is slower than expected, they will still play a role in boosting demand and driving price growth over the next five years, says Savills.
Further cuts will be supported by the relaxation of mortgage rules earlier this year, allowing some buyers to borrow more relative to their incomes. Beyond 2026, the UK economy is also expected to be materially stronger, with low inflation, rising GDP growth, falling unemployment, and an undersupply of new homes which will maintain upwards pressure on real prices.
Savills expects house prices to rise by 22.2% in the next five years, peaking in 2028 and 2029 at 5.0% and 5.5%, respectively.
Transaction volumes are expected to dip in 2026, following this year’s boost from stamp duty changes. But over the next five years, increased affordability is expected to drive transaction volumes close to the pre-pandemic average.
