Matthew Henderson
Associate Director, Residential Research
The global economy remains negatively impacted by the US-Israeli conflict with Iran, and the resulting energy supply shock. China has unexpectedly cut its oil imports over 40% since February which has helped to keep oil prices below worst-case scenarios and dampened the global impact. However, there remains significant uncertainty around the potential duration of the war.
Domestically, the UK now has its sixth Prime Minister in the ten years since David Cameron. This brings a new range of political uncertainties and speculation; we await the October budget for further policy clarity. Over the past four months, against expectation, UK inflation has not risen. There remains an upward pressure on goods and services from the energy shock with second-round effects that are ‘likely to be stronger […] and more long-lasting’ according to the Monetary Policy Committee (MPC).
After the Bank of England (BoE) cut the base rate in December it was widely expected to continue its cutting cycle through 2026. The BoE is now balancing the UK’s ‘weakness in economic activity and demand for labour’ with the realities of the global supply shock. Since the start of the conflict the MPC has held rates four times, regularly referencing ‘the conflict in the Middle East’. A growing contingent of members – three at the latest meeting – voted for a rate hike as a ‘risk management’ approach to further inflationary pressures.
The prime sales market continues to suffer from either buyers or sellers differing market views. Sellers looks at decades of house price growth with the expectation that these increases are likely to continue. Whereas buyers look at stretched affordability alongside global and local headwinds, expecting to see a correction in values.
This has led to slow moving markets across the country where it takes an ever-increasing time to agree a price and complete a transaction.
|
2026 |
2027 |
2028 |
2029 |
2030 |
5-year cumulative |
|
|
Sales |
||||||
|
UK, mainstream |
3.0% |
3.0% |
2.5% |
2.5% |
2.5% |
14.2% |
|
Prime Central London |
-3.0% |
-1.0% |
1.0% |
3.5% |
4.0% |
4.4% |
|
Prime Outer London |
-1.5% |
0.0% |
2.5% |
3.5% |
4.5% |
9.2% |
|
Prime Regional |
-1.0% |
0.0% |
2.5% |
3.0% |
4.0% |
8.7% |
|
Lettings |
||||||
|
Prime London |
1.0% |
2.5% |
2.0% |
1.0% |
1.5% |
8.3% |
|
Prime Regional |
2.0% |
2.5% |
2.5% |
3.0% |
3.0% |
13.7% |
Due to these factors, we are forecasting further downward pressure on values over the remainder of 2026, with these pressures softening in 2027 as interest rates are cut and we receive greater political clarity.
Meanwhile the less discretionary mainstream housing market has shown greater resilience, and we are forecasting growth of over 14% during the next 5 years with interest rate cuts and lower debt costs a considerable part of this calculation.
Read the full report here.