Key facts
- UK home prices are forecast to rise 1.8% this year, a decrease from the previous prediction of 2.5%.
- London home prices are expected to fall 0.3% this year.
- High deposit requirements, elevated mortgage rates, and inflated prices are the main constraints for first-time buyers.
- Rental costs are predicted to rise faster than buying costs over the next few years.
- Rental fees in London are expected to increase by 3.0% this year and for the following two years.
British home prices are expected to see slower growth this year than previously anticipated, with a Reuters poll of housing analysts indicating a 1.8% increase, down from a prior forecast of 2.5%. The London market, in particular, is projected to experience a 0.3% decline in property values this year, a significant shift from its previous strength.
Analysts attribute the slowdown to the combined pressures of higher borrowing costs, influenced by global uncertainty and geopolitical events, and persistent inflation, which collectively reduce the purchasing power of potential buyers. This cooling demand is expected to disproportionately affect more expensive markets.
For first-time buyers, the primary obstacles remain the substantial deposits required, elevated mortgage rates, and the overall high cost of housing. Saving for a deposit is particularly challenging in high-value areas like London. Rental costs, however, are predicted to outpace buying costs in the coming years due to dipping supply as some investors exit the market, partly influenced by new landlord regulations.
Rental fees in London are forecast to rise by 3.0% annually for the next three years, while urban rents are expected to increase by 3.3% in 2026 before moderating. This upward trend in rents is driven by increasing household formation and a shortage of available accommodation. One buy-to-let lender noted softer consumer and business sentiment amidst ongoing uncertainties.