House Prices Forecast to Slide Until 2028, London Worst Hit

UK house prices are set to fall for the next several years, continuing through to 2028, with London expected to suffer the steepest declines of any region, according to a report covered by City AM. For a market that has grown accustomed to cycles of sharp correction followed by rapid recovery, a sustained multi-year downturn of this nature represents a markedly different proposition, one that demands a recalibration of assumptions across the investment community.

The significance of this forecast lies less in any single data point and more in its duration. Short, sharp corrections are relatively easy for landlords, developers and first-time buyers to plan around: hold your nerve, wait out the dip, and transact when conditions stabilise. A prolonged slide stretching the better part of this decade is a different challenge altogether. It alters the maths on everything from buy-to-let yields to development appraisals, and it changes the calculus for anyone weighing up whether now is the moment to enter the market or to sit on the sidelines.

London's position at the sharp end of this forecast is particularly notable given the capital's historic role as the UK market's bellwether and its disproportionate weight in national house price indices. A capital city that has long commanded a premium over the rest of the country, underpinned by international capital flows, high earners and constrained supply, facing the hardest correction signals a shift in the forces driving the market. PropertyNews analysis suggests this points to affordability constraints finally biting hardest where prices climbed furthest, a dynamic that regional cities such as Manchester, Birmingham, Leeds, Liverpool and Newcastle have historically been more insulated from, given their comparatively lower price bases and the stronger yield profiles that have attracted investors seeking value outside the capital.

For buy-to-let landlords, a prolonged period of price weakness forces a reassessment of strategy. Capital appreciation has for years been treated as a near-certain complement to rental income, allowing investors to tolerate thinner yields in exchange for long-term value growth. If that appreciation is delayed until the end of the decade, landlords, particularly those in London and the South East including commuter markets such as Surrey, will need to lean more heavily on rental income and operational efficiency to justify holding assets, rather than counting on price growth to carry returns.

First-time buyers, by contrast, may find the picture more encouraging, at least in principle. A sustained fall in prices, if accompanied by stable or improving mortgage availability, could narrow the deposit gap that has locked many younger buyers out of ownership, particularly in London where affordability has been most stretched. However, PropertyNews analysis cautions that falling prices alone do not guarantee improved access: if lenders respond to a weakening market by tightening credit conditions or by pricing risk more conservatively, the benefit of lower prices could be offset by reduced mortgage availability, leaving the net effect on first-time buyer activity uncertain.

Commercial investors and developers face their own distinct set of pressures. A multi-year decline in residential values complicates site valuations, land acquisition decisions and the viability of schemes that were underwritten on the assumption of steady capital growth. Developers active in London will need to stress-test pipelines against a weaker exit environment, while those focused on regional cities may find relative resilience there offers a more defensible investment case over the coming cycle. Over the next six to twelve months, PropertyNews expects transaction volumes to remain subdued as buyers and sellers each wait for clearer signals on where the market is heading, with price discovery becoming more difficult in a falling market where comparable sales lag current conditions.

The clearest conclusion for market participants is that strategies built on the expectation of near-term capital growth, particularly in London, need revisiting. Investors who can secure strong rental yields and operate efficiently are better placed to weather a prolonged downturn than those relying on appreciation, and regional markets outside the capital look set to offer relatively more stability than London through to 2028.