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House Price Predictions for the Next 5 Years

In the wake of record-breaking house price growth, low-interest rates and shifts in supply and demand, the last 18 months have been an exciting time indeed for the UK market. But what are the house price predictions for the next 5 years in the UK?

When it comes to UK property, timing is everything. The UK property market has always remained a robust and sought-after investment destination. 

We take a look at recent trends, the current state of the UK housing market and what investors can expect through 2026. 

Recent Housing Trends in the UK Property Market

Since the start of the century, the average price of a UK home has tripled. While partly driven by supply and demand due to a shortage of housing stock, a big factor in this rapid house price growth has been record-low interest rates. 

For more than a decade, mortgage rates in the UK have been rock bottom and as low as 0.1% as the Pandemic was at a peak. With interest rates so low, it’s never been cheaper to borrow money to buy a home.

2020 – 2021 Housing Trends in the UK Market

Before getting into house price predictions for the next 5 years, it’s important to examine recent trends in the market and the factors driving them. 

With the start of the Pandemic, low-interest rates were joined by a few other important factors that powered the upward trend of house prices in England. Such as:

  • For many, savings increased over the series of lockdowns. 
  • The Stamp Duty Holiday came into effect (which meant homebuyers could save up to £15,000 in taxes between July 2020 and June 2021) 
  • A shift in lifestyle trends with many relocating away from main cities in search of more space spurred an active market.

While the first couple of months of 2020 saw a lockdown of the UK property market, upon its reopening, we saw prices reach never-before-seen heights. 

  • The average price of a UK home increased more than £30,000, reaching £250,000 for the first time. 
  • Housing transactions reached 442,930 in the year to September 2021, the highest annual figure since 2014. 
  • 2021 was also the strongest year for mortgage lending since 2007, with a record £316 billion of home loans given.

UK Regional House Price Variations

While the overall trend of the past 18 months has seen house prices on the rise, property data indicates regional variations across the country.

The UK’s average house price is currently £281,000, however, the Northeast recorded the highest growth from August 2020 – to August 2021 at 13% with average property prices of £149,000. London, meanwhile, recorded the slowest annual pace of growth over the same period, at 7.5% with record average property prices of £526,000. 

Liverpool saw one of the largest increases in the past year with 21.6% – some of the biggest price growth since before the Pandemic began. With homebuyers generally searching for greater space, the number of sales in locations outside of London took a great leap – up 35% in 2021. 

uk house price forecast for 2022

UK House Price Forecast for 2022 

With the ending of the stamp duty holiday and an increase in mortgage rates, many predict that house price growth will slow in 2022. 

Considering the current state of the UK housing market, while we continue to see robust demand, the economy in rebound and buyer and seller confidence, the property market predictions are leaning towards stability for the prices of houses on the market in 2022 after a frenzied 2021. 

Before looking at house price predictions for the next 5 years, here are some of the main trends likely to have an impact this year:

  • Rural Areas Remain Popular

Houses in attractive rural areas with good connections and amenities are expected to see strong growth in 2022, especially as buyers become more confident in areas outside of London. Properties in the £500k to £700k price range continue to move fast and remain highly sought after.

  • Supply and Demand Imbalance

A trend set for 2022 and beyond is the imbalance between supply and demand. Growing populations in a number of up-and-coming areas have led to a significant increase in the number of buyers and not enough properties to meet demand. 

  • Rising Interest Rates on Property

The Bank of England recently raised interest rates for the first time in three years due to concerns over inflation (which reached a decade high of 5.1%). Higher borrowing costs combined with renewed Covid-19 uncertainty may lead to a slow down in the UK property market in 2022, and more conserve predictions put average annual growth at 3.5%.

  • Projections Remain Optimistic in 2022

The most optimistic projections for the growth of the UK housing market in 2022 state that average property prices could grow by up to 7%. According to Zoopla, housing transactions are expected to reduce by 20% to 1.2m in 2022, in line with the long-run average, but still relatively high compared to the last decade. Property website Rightmove, predicts 5% annual growth nationally and 3% in London. 

While nothing is certain, the strength of the market surprised everyone in 2021, and with changing lifestyle trends and supply and demand patterns, while the market may certainly be cooler, on the whole, there are plenty of regions that will see impressive upward trends remain.

Read more on Housing Market Predictions for the year, in this article.

house price predictions for the next five years

House Price Predictions for the Next 5 years

What does the next half-decade hold for the UK housing market? Future projections for the UK housing market are optimistic. By 2026, Savills predicts that house prices will increase more than £40,000 to reach £370,785.

Something impacting house price predictions for the next 5 years especially, is the remote work trend. As the remote working trend is set to stay, we expect relocating to remain as people go in search of more space in areas outside of cities. The imbalance between supply and demand is likely to continue to spur the increase in house prices too, while the environment for first-time buyers is expected to remain challenging over the coming years.

Narrowing the North-South Gap

Over the next 5 years, the current North-South divide in the housing market is expected to narrow, with some regions recording rises of almost 19% during the period. However, the price gap between the North-West and London is still expected to be significant. By the end of 2026, the average home in the North-West is expected to be £272,732, £266,417 in Yorkshire and £713,987 in London.

Where are the Best Places in the UK to Invest in Property? 

Looking at the five-year UK property forecast and today’s UK property prices, where are some of the best places to invest in UK property right now? Property market predictions mean that Investors looking for regions with positive potential for price growth can expect to see good results in the Northern Powerhouse cities. 

Properties in Liverpool and Manchester are expected to experience strong growth, and the wider North West is expected to see over 18% growth in house values in the next five years to 2026. Properties in these cities, in particular, are still relatively affordable, and with the right property, investors can capitalise on decent capital gains. 

When it comes to house price predictions for the next 5 years, the UK market is expected to see strong growth. Investors would do well to look to the north of England, areas with growing populations where demand is outstripping supply and rural areas with good connections and amenities that may be popular with those looking for more space. 

 

FAQs 

Is the Housing Market Slowing Down?

2021 was a record year for the UK housing market, with house prices reaching never-before-seen heights. The combination of low-interest rates, a stamp-duty incentive for much of the year and a widespread revaluation of housing needs presented unique market conditions. It’s expected to be difficult to replicate these market conditions throughout 2022, which could see the housing market slow down.

Are House Prices dropping in 2022?

Many projections expect the UK housing market to cool in 2022. However, regional variations will see prices in some areas remain robust. The highest projected growth is expected in the North-West of England and East Midlands, while growth in London is projected to remain relatively low.