Forecasts indicate that house prices are likely to surge by nearly 25% over the next five years, with properties in the northern regions of the UK anticipated to experience a more significant rise compared to those in the southern areas.

According to Savills, one of the leading estate agents in the UK, the average increase in house prices across the nation is estimated to reach 23.4% between 2025 and 2029. This growth is expected to be fueled by lower mortgage rates, wage growth that outpaces inflation, and a persistent shortage of housing supply.

The Labour party has announced plans to construct 1.5 million homes within the next five years, yet there are concerns within the housing sector regarding the feasibility of this target. In the absence of a significant boost in the construction of new homes, Savills anticipates that the demand will continue to exceed the supply substantially.

“With reduced external distractions, the mid-term trajectory of house prices will be influenced primarily by the core factors of demand, supply, and affordability,” stated Lucian Cook, head of residential research at Savills. He further explained that the trends in mortgage rates have been crucial to buyer behavior over the last two years, and the recent decrease in monthly mortgage payments is contributing to renewed buyer confidence, resulting in the moderate growth in house prices observed recently. Cook believes that a consistent improvement in affordability could enable house price increases to accelerate in the coming years.

Savills predicts that the housing market in the northwest of England will be the most robust, with prices there expected to rise by 29.4% by the end of 2029 compared to the start of 2025.

Conversely, regions in the southeast and southwest are forecasted to lag behind. In London, known as the priciest city in the UK for home purchases, prices are projected to increase by 17.1% over the next five years, slightly lower than the 17.6% expected in the southeast.

However, house prices in the capital have demonstrated slightly stronger growth than Savills had initially anticipated this year, attributed to a return of individuals to their workplaces as homeworking levels decline, a trend expected to continue into 2025.

According to Savills, the persistent north-south housing divide is attributed to generally lower property prices in the north. Buyers with mortgages in these areas currently experience less pressure from mortgage rates that, although lower than a year ago, are still considerably higher than pre-pandemic levels.

“Even with declining mortgage rates, prospective buyers in London and the southeast will still face challenges, needing to borrow more relative to their income and secure larger deposits, which will limit house price growth,” explained Emily Williams, director of research at Savills.