London’s House Prices: Forecast Slashed as Growth Lags Behind UK Regions
London’s house prices are now expected to rise just 15.3% over the next five years, the slowest rate of growth across the UK, according to fresh forecasts from property experts Savills.
That’s a notable downgrade for the capital. And while the national picture is looking slightly brighter, the capital’s inflated affordability gap continues to drag its market down.
Elsewhere, the contrast is stark. The North West, one of the most affordable regions, is tipped to see house prices soar by over 31% in the same period. That’s more than double the projected growth for London.
The forecast comes amid changing economic winds and shifting lending rules. Savills now predicts that average UK house prices will rise by 1% in 2025, a significant drop from the 4% it expected earlier in the year. But its long-term outlook has been lifted slightly, with average house prices set to climb 24.5% by 2029.
The reason? Mortgage rules are loosening up.
“Interest rates have fallen as expected, giving buyers a bit more financial capacity than they had a year ago,” said Lucian Cook, head of residential research at Savills.
“But a lot has changed over the last six months. Greater geopolitical uncertainty, including tariffs and trade wars, has made predicting the precise path of further cuts more challenging.”
The market has been jittery in 2025, with a patchy start to the year. Buyers initially surged into the market early on, racing to complete purchases ahead of stamp duty changes. That activity, though, has since cooled.
Savills says that despite the rocky start, house sales are still on track to reach 1.04 million by year-end.
There is, however, a silver lining. Lenders have started to take a more generous approach to affordability checks. That shift is expected to support both prices and transaction volumes, especially for first-time buyers.
“Recent easing of mortgage regulations, including more flexibility on affordability stress tests and higher allowances for loans above 4.5 times income, is likely to boost transaction volumes, particularly by helping more first-time buyers get on the ladder,” added Mr Cook.
By the end of 2029, the average UK house is projected to cost £448,600, up from £362,300 mid-2025. That’s a jump of around £86,000.
Still, not everyone will benefit equally. London’s notoriously high property prices continue to limit growth potential, despite the broader boost from looser lending. Affordability remains a key issue in the capital.
Emily Williams, director of research at Savills, noted a cautious optimism: “We anticipate that buyer demand will pick up heading into early autumn, particularly among first-time buyers and mortgaged home movers, driven by an expected base rate cut in August and a more competitive mortgage market.”
The forecast relies on data from the Land Registry and Nationwide Building Society, and reflects ongoing volatility in both domestic and global markets.
For now, London’s housing market finds itself trailing behind. Its recovery may be slower, but it’s not off the radar yet. The question remains, will looser mortgage rules be enough to reignite demand in the capital?
