Savills forecasts further house price falls and lower transactions in 2027

Savills forecasts further house price falls and lower transactions in 2027

Savills predicts mainstream house prices will decline by around 1.5% in 2027 amid ongoing geopolitical tensions and elevated mortgage rates, with transaction volumes also expected to drop before recovery begins in 2028.

Property owners and landlords face a challenging year ahead as Savills, a leading property consultancy, forecasts that house prices across much of southern England and beyond will continue to fall through 2027. The firm highlights that the prolonged conflict in the Middle East has delayed any meaningful relief in mortgage rates, which are now expected to remain above 5% until early 2028. This environment is set to suppress buyer demand and push prices down by an average of 1.5% next year, extending a total decline of approximately 3.0% over the remainder of 2026 and 2027.

Transaction volumes are also expected to decline in 2027 as higher borrowing costs reduce buyer appetite. Savills anticipates that activity will begin to recover from 2028 onwards, although the pace of recovery will vary among different buyer groups. This forecast is notably more pessimistic than that of Connells, which recently projected a smaller price fall this year followed by modest growth in 2027.

Details of Savills’ 2027 housing market outlook

Emily Williams, director of residential research at Savills, emphasises the impact of the ongoing Middle East conflict on mortgage affordability and buyer sentiment. The conflict has pushed back expectations for lower mortgage rates, keeping borrowing costs elevated and suppressing market activity. Despite this, Williams notes that a sharper correction in house prices is unlikely. This is because most homeowners have already adjusted to higher borrowing costs since late 2022, and the labour market remains resilient, factors which should limit forced sales and further downward pressure on prices.

Savills’ five-year forecast suggests that after the downturn, house prices will begin to rise again in the second half of 2028, with growth reaching 3.5% for that year. The firm expects stronger growth of 5.0% annually in 2029 and 2030, driven by mortgage rates bottoming out and sustained income growth outpacing house price increases. First-time buyers are projected to lead the recovery from 2028, supported by improved deposit affordability, relaxed mortgage lending restrictions, and government initiatives such as the ‘Your First Home’ scheme. This group is expected to become the largest buyer segment by 2029, overtaking cash buyers.

Meanwhile, home mover activity is forecast to remain subdued until affordability improves sufficiently to release pent-up demand. Cash purchases are expected to decline, and buy-to-let activity is likely to stay below long-term averages due to lower returns, increased regulation, and higher taxation. This will contribute to a shift towards larger, professional landlords in the rental sector.

Regionally, the strongest house price growth over the next five years is expected in the North of England, Wales, and Scotland, where affordability and economic prospects are more favourable. In contrast, London’s high price-to-earnings ratio means slower growth, continuing a trend of price convergence seen in recent years.

Implications for landlords and letting agents in 2027

For private landlords and letting agents, the forecasted downturn and slow recovery in house prices and transactions have several practical implications. Lower transaction volumes may reduce opportunities for portfolio expansion through property purchases. Landlords should be cautious about overextending financially, given the likelihood of continued high mortgage rates and potential pressure on rental demand as some buyers delay moving.

The expected subdued home mover activity could maintain steady rental demand in the short term, as households postpone purchasing homes. However, the anticipated decline in buy-to-let activity and increased regulation may accelerate the professionalisation of the rental market, with larger landlords and institutional investors gaining greater market share.

Landlords should monitor regional market conditions closely, as areas with stronger economic fundamentals and affordability may offer better prospects for rental income growth and capital appreciation. In contrast, properties in overheated markets like London might see slower value growth and require more careful management to maintain rental yields.

Uncertainties and what landlords should watch

While Savills’ forecast provides a detailed outlook, several uncertainties remain. The duration and intensity of the Middle East conflict could change, potentially affecting mortgage rates and buyer confidence. Government policy interventions, such as changes to mortgage lending rules or support schemes for first-time buyers, could also alter market dynamics.

Landlords should keep abreast of evolving regulations, especially those impacting buy-to-let taxation and rental sector compliance, as these will influence investment returns and operational costs. The pace and nature of market recovery from 2028 onwards will depend on broader economic factors including wage growth, inflation, and interest rate movements.

Practical steps for landlords to prepare

• Review mortgage arrangements to ensure affordability under sustained higher interest rates.
• Assess rental pricing strategies in light of potential shifts in tenant demand and competition.
• Stay informed about regional market trends to identify areas with stronger growth potential.
• Monitor regulatory developments affecting landlord obligations, particularly regarding energy efficiency and tenant protections.
• Consider portfolio diversification to mitigate risks associated with market fluctuations.

Supporting landlords through changing market conditions

The Landlord Association (TLA) offers members access to a range of compliance resources and tools designed to support landlords and letting agents in managing their portfolios effectively amid market uncertainty. TLA’s new property management and compliance platform, ORBIT, currently in BETA testing, helps organise property records, monitor regulatory updates, and maintain documentation related to tenancy agreements, safety checks, and repairs. This can be particularly useful as landlords navigate evolving obligations and market pressures.

Membership also provides practical guidance on tenancy law, rent setting, and possession procedures, helping landlords stay compliant and responsive to tenant needs. By leveraging TLA’s resources, landlords can better prepare for the anticipated challenges in 2027 and position their portfolios for recovery in the years ahead.

Landlords should regularly review their property management practices and remain vigilant for any changes in government policy or market conditions that could impact their investments.

Sources: Landlord Today