House prices set to fall until 2028 as London worst hit

House prices are not expected to recover from the UK’s property market slump until the second half of 2028, with London set to be the country’s worst-hit region.

The average house price in the UK is set to fall by a further 1.5 per cent in 2027, according to new research from estate agency Savills, before recovering only in the second half of the following year. 

The soaring mortgage rates caused by the war in Iran have put pressure on house prices, as prospective home buyers hold off on moving amid fears that inflation will continue to climb. 

Emily Williams, director of residential research at Savills, said: “The drawn-out conflict in the Middle East has pushed back the prospect of meaningful mortgage-rate relief, which will weigh on buyer sentiment and affordability. We expect this will suppress activity and put pressure on prices next year.”

House prices are expected to recover over the next half-decade, putting on 15.8 per cent by 2031, exceeding income growth of 14.4 per cent. 

But London homeowners are set to miss out on this reprieve, with prices in the capital set to grow by the lowest amount among the UK’s regions. 

London house prices worst-hit

According to Savills, house prices in London are set to grow by just 8.1 per cent over the five years to 2031, compared with 23.3 per cent in the North West and 22.2 per cent in the North East. 

London house prices have fallen sharply in recent months, as the capital’s typically high prices make stamp duty charges especially high and force sellers to cut asking prices. 

The average house price in the capital is more than 11 times the average salary, compared to six times typical earnings in the three northern regions of England. This means buyers in London either need above-average incomes or very large deposits to get on the housing ladder, Savills said.

Dan Hill, a residential research associate at the firm, said: “Markets combining relative affordability with strong employment and investment prospects are expected to outperform, including Manchester, Leeds, Liverpool and Bristol, alongside well-connected commuter locations offering better value than their surrounding regions.

“Property type will also remain an important driver of performance. Demand for larger family homes continues to be supported by flexible working patterns and changing buyer demographics, while flats face headwinds from affordability constraints, building safety concerns and greater supply,” he added.