Savills: No UK Housing Recovery Until 2028 as Rates Stay High

Britain's housing market will not stage a meaningful recovery until 2028, according to new forecasts from the property firm Savills, as mortgage rates linked to the war in the Middle East stay higher for longer and continue to deter buyers. Savills said average house prices are expected to drift lower through the remainder of 2026 before falling by 1.5% in 2027, as the prolonged conflict undermines buyer confidence and keeps borrowing costs elevated.

For UK property investors, this is a significant recalibration of expectations. Many had anticipated that mortgage rates would ease steadily as inflation cooled, opening the door to a gradual return of transaction volumes and price growth. Savills' forecast instead points to a longer, flatter stretch of stagnation, with the geopolitical backdrop now acting as a direct constraint on the domestic property cycle. As the Guardian reported, the firm's analysis ties the delayed recovery explicitly to the Middle East conflict's effect on mortgage pricing, rather than to purely domestic economic factors such as wage growth or housing supply.

The implications differ sharply across market segments. Buy-to-let landlords, already navigating tighter regulation and higher financing costs in recent years, face a further period in which capital growth cannot be relied upon to offset thin rental yields. Those with properties in regional cities such as Manchester, Birmingham, Leeds, Liverpool and Newcastle, where rental demand has generally remained resilient even as national price growth has stalled, may be better placed to weather this period than landlords concentrated in London and the South East, where affordability pressures are more acute and price falls are likely to be felt most keenly.

First-time buyers, meanwhile, find themselves in an unusual position. A fall in average prices of 1.5% in 2027, as Savills forecasts, would in isolation improve affordability. But if mortgage rates remain elevated for longer because of the war's effect on financial markets, the benefit of lower prices could be offset by higher monthly repayment costs, leaving overall affordability little changed. This is a crucial distinction for anyone currently saving for a deposit: the headline price falls Savills is forecasting should not be read as a straightforward signal that now is the moment to wait for a bargain, because the cost of borrowing is the other half of the equation.

Commercial property investors and developers will also need to recalibrate their assumptions. A housing market that is not expected to recover until 2028 implies a longer runway before land values and new-build pricing in residential-led schemes firm up again. Developers weighing the viability of schemes in Surrey and other high-value commuter markets, where buyer sentiment is particularly sensitive to mortgage costs, may find appraisals harder to stack up over the next two years. Conversely, this extended period of subdued prices could present opportunities for well-capitalised investors to acquire sites or standing stock at more favourable valuations ahead of the eventual recovery Savills anticipates from 2028 onwards.

Looking ahead to the next six to twelve months, the clear takeaway from Savills' forecast is that the UK housing market's fortunes are now more tightly bound to global geopolitical risk than many participants had previously assumed. As long as the Middle East conflict remains unresolved and continues to exert upward pressure on mortgage rates, expectations of a swift return to price growth should be set aside. Investors, landlords and developers alike would be well advised to plan on the basis of continued softness through 2026 and 2027, rather than betting on an early rebound.

The analytical conclusion is straightforward: this is a forecast that reframes the housing market's recovery timeline around external shocks rather than domestic policy or supply dynamics. Those who had pencilled in 2026 or 2027 as the turning point will need to revise their models, and the firms and households best positioned to benefit will be those with the patience and liquidity to hold through to 2028 rather than those relying on a near-term bounce.