Just as in many other countries, the housing market in the UK grew substantially during the coronavirus pandemic, fueled by robust demand and low borrowing costs. Nevertheless, high inflation and the increase in mortgage rates has led to house price growth slowing down. According to the forecast, 2024 is expected to see house prices decrease by three percent. Between 2024 and 2028, the average house price growth is projected at 2.7 percent. A contraction after a period of continuous growth In June 2022, the UK's house price index exceeded 150 index points, meaning that since 2015 which was the base year for the index, house prices had increased by 50 percent. In just two years, between 2020 and 2022, the index surged by 30 index points. As the market stood in December 2023, the average price for a home stood at approximately 284,691 British pounds. Rents are expected to continue to grow According to another forecast, the prime residential market is also expected to see rental prices grow in the next years. Growth is forecast to be stronger in 2024 and slow down in the period between 2025 and 2028. The rental market in London is expected to follow a similar trend, with Central London slightly outperforming Greater London.

During the COVID-19 pandemic, the number of house sales in the UK spiked, followed by a period of decline. In 2023, the housing market slowed notably, and in September 2024, transaction volumes fell below 50,000. House sales volumes are affected by a number of factors, including mortgage rates, house prices, supply, demand, as well as the overall health of the market. The economic uncertainty and rising unemployment rates has also affected the homebuyer sentiment of Brits. How have UK house prices developed over the past 10 years? House prices in the UK have increased year-on-year since 2015, except for a brief period of decline in the second half of 2023 and the beginning of 2024. That is based on the 12-month percentage change of the UK house price index. At the peak of the housing boom in 2022, prices soared by nearly 14 percent. The decline that followed was mild, at under three percent. The cooling in the market was more pronounced in England and Wales, where the average house price declined in 2023. Conversely, growth in Scotland and Northern Ireland continued. What is the impact of mortgage rates on house sales? For a long period, mortgage rates were at record-low, allowing prospective homebuyers to take out a 10-year loan at a mortgage rate of less than three percent. In the last quarter of 2021, this period came to an end as the Bank of England rose the bank lending rate to contain the spike in inflation. Naturally, the higher borrowing costs affected consumer sentiment, urging many homebuyers to place their plans on hold and leading to a drop in sales.

According to the forecast, the North East and Wales are the regions in the United Kingdom estimated to see the highest overall growth in house prices over the five-year period between 2024 and 2028. Just behind are North West, Yorkshire & the Humber, and Scotland, which are forecast to see house prices increase by 20.2 percent over the five-year period. In London, house prices are expected to rise by 13.9 percent.

England accounts for the majority of sales in the residential real estate market in the United Kingdom. In September 2024, the total number of housing transactions in the country amounted to nearly 92,000, with approximately 80,000 of these property sales being completed in England. Historically, sales activity has observed notable fluctuations because of the seasonal nature of the market, but also other trends in the market, such as the slump in April 2020 related to the COVID-19 pandemic A declining number of home sales The annual number of home sales in the UK has declined since 2021, with 2023 exhibiting the lowest transaction volume since 2012. The main reason for that trend is the increase in the cost of housing. House prices grew year-on-year between 2012 and 2022, with growth accelerating toward the end of the period due to the record-low mortgage rates. As the cost of living crisis hit in 2022, the Bank of England hiked interest rates, resulting in dramatically higher home finance costs. With house prices at their peak and a double increase in borrowing costs, many prospective homebuyers could not afford to buy and placed their plans on hold. How will prices develop in the next five years? After a slight decline in 2024, house prices in the UK are expected to pick up in the next year and continue on an upward trend until 2028. On average, house prices are projected to grow by 2.7 percent per year.

According to the forecast, house prices in London are expected to fall slightly in 2024, followed by a recovery in the following years. The decline can be explained with the cost of living crisis and the dramatic increase in borrowing costs. As the economy recovers in the next five-years, house prices for mainstream properties are forecast to rise by almost 14 percent. In 2023, the average house price in London ranged between 350,000 British pounds and 1.4 million British pounds, depending on the borough. Barking and Dagenham, Bexley, Newham, and Croydon were some of the most affordable boroughs to buy a house.

The housing market in England cooled in 2022 and 2023, after a record year in 2021. In 2023, the number of housing transactions reached approximately 858,000, which was the lowest figure since 2012 when the market was still recovering from the global financial crisis. Some of the main factors that have led to the decline in home buying are the cost of living crisis, higher mortgage rates, low inventory, and the rapid increase in house prices across the UK.

The volume of residential property sales in London dropped substantially after 2007 as a result of the global financial crisis. Though housing transactions gradually increased until 2014, sales volumes remained shy from the period before the financial crisis. The housing boom in 2021 led to transactions jumping to nearly 108,000, up from 75,000 the year before. That substantial increase was followed by two years of the market contracting.