UK House Price Predictions For The Next 5 Years

House prices in the UK have been on the rise for some time now, with some properties selling for 4 or 5 times their original sale price from just 20 years ago. People lucky enough to have purchased a house in the 1990s or before are enjoying unprecedented levels of equity in their property, while first-time buyers are being crushed under the weight of high deposits, high mortgage rates and inflation. But is this meteoric rise set to continue? Or is the old adage true: what goes up must come down? Let’s take a look at some expert UK house price predictions for the next 5 years.

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What will happen to UK house prices in the next 5 years?

Many factors have been influencing the UK housing market and resulting in some volatile changes. There was a surge in house prices during the pandemic, and many potential homebuyers have actually postponed their plans to purchase a home. The cost of living crisis is also putting pressure on household budgets, which could make it more difficult for people to afford to buy a home. While the actual sale price of houses has remained fairly steady, inflation and higher mortgage interest rates have also made potential buyers much more cautious and less likely to commit to buying. This has had a modest effect on sale prices, as some sellers have reduced their asking prices to tempt buyers. The patient sellers however have stuck to their guns and still made sales, so it may be only motivated sellers having this issue.

Could these changes result in a housing market crash?

Nationwide has published data showing that house prices in the UK have fallen by 1.1% over the past year. This is the first time house prices have dropped in the last 3 years. Nationwide has also predicted a 5% drop in house prices over the next 5 years. Savills also predicted a dip in house prices in 2023, although also anticipate a recovery by as soon as 2025. As the chart below shows, Savills does not predict a complete recovery for all areas, with the East and South East only reaching a 3% increase overall. London is even worse with a predicted reduction of -1.7%.

Source: https://www.savills.co.uk/insight-and-opinion/research-consultancy/residential-market-forecasts.aspx

While the market is volatile and subject to a lot of external influences, there is unlikely to be a ‘crash’. The consensus among property experts is that there will be a slight drop in house prices, as we have already seen in some areas, but the market will recover fairly quickly. House price predictions for the next 5 years are that UK house prices will continue to rise overall in the next 5 years but at a slower rate than in recent years. The bubble is unlikely to burst, but it may bob along sedately for a while.

Have UK house prices fallen in 2023?

According to the Office for National Statistics, UK house prices rose by 1.7% from June 2022 to June 2023, when the average UK house was priced at £288,000. That’s a £5,000 jump from the previous year. But interestingly, it’s also £5,000 less than the highest price we saw in November 2022. However, this increase is not uniform in all areas of the UK – the North East saw prices rising by as much as 4.7%, while London prices actually went down by 0.6%. This is in line with Savills’ predictions that London will come out worse for housing prices compared with the rest of the UK. A slightly more modest growth than in recent years hardly constitutes a ‘crash’. London has had famously high house prices for some time, so with local government efforts like the Help to Buy scheme, the market has become a little more buyer-friendly.

Source: https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/june2023

How much will house prices go up in the next 5 years?

As mentioned earlier with regards to UK house price predictions for the next 5 years, Savills does predict an overall rise in house prices, despite a slight dip in 2023. This dip has not been nearly as severe as predictions from this time last year, so it is important not to take these forecasts as gospel, even those from experts. Interestingly, the Prime Capital Value Forecast from Savills shows even more robust growth in what they call the ‘prime market’, which comprises aspirational and desirable properties in the top 5% of the market by house price.

While the experts don’t exactly agree on how fast they’ll fall, they do seem to think that by the end of 2024, prices will be about 10% lower. To put it in perspective, that wipes out half the profit homeowners made since the pandemic started. But here’s an interesting twist: some say that if banks start offering better mortgage rates next year, we could see prices bouncing back from late 2024. And if other financial stars align, like a drop in the base rate around mid-2024, there could even be a big 7% jump in house prices by 2026.

So, those fearing a total housing market meltdown can probably relax a bit. And there’s more good news: the Office for Budget Responsibility (OBR) thinks we might see another drop in prices next year but is optimistic about a 3.5% increase by 2027. Meanwhile, Statista is playing it safe, estimating an average growth of 1.7% from 2023 to 2027.

As far as UK house price predictions for the next 5 years go, it is very likely that house prices will continue to rise, perhaps at a slower rate than before due to the factors mentioned above. The population is growing and there is a housing deficit in the UK of 4.3 million homes, which means houses will be in high demand for some time.

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Should I buy a house now or wait?

This brings us to the all-important question: to buy or not to buy a house right now?

Well, if you’re sitting pretty financially and you’ve got your eyes set on a dream home, why wait? Go for it. But if the idea of prices possibly dropping soon has got you worried, maybe hold off for a bit. Your decision should really be shaped by where you stand financially, what your future looks like, and the local housing market vibes. And remember, picking a new place isn’t just about the bricks and the price tag. It’s about finding a spot that feels right.

Now, if you’re thinking about investing in property to rent it out, there’s a bit more homework involved. You’ll want to be sure you can still make money from it, even if things like interest rates go up or house prices drop. Take a close look at the local rental landscape, consider the demand, and weigh up the potential return on what you’re spending. And don’t forget – being a landlord isn’t always smooth sailing. Between hunting for the right tenants and handling the usual landlord duties, you’ll want to be sure you’re ready for the commitment.

Before you go …

We hope this article has helped you to get a better understanding of the state of the current housing market as well as uncover the UK house price predictions for the next 5 years.

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