Economic summary

News

Over the past month, the UK backdrop has been mixed-to-soft: inflation stalled at 3.8% in August, prompting the Bank of England on 17 September to hold Bank Rate at 4% (with two members voting for a cut) while continuing to run down gilt holdings.

Growth flatlined in July (0.0% m/m), with production falling and only slight gains in services and construction, and early September survey data point to a sharp loss of momentum as the flash composite PMI slipped to 51.0 from 53.5.

The labour market has loosened further, with unemployment rising to 4.7% in May–July and payrolled employment edging lower on early estimates. Public finances worsened, with August borrowing at £18.0bn, above both last year and OBR projections.

Indicators

• Average house prices increased very slightly to £270k
• Mortgage rates for 60 % LTV and 95 % LTV both decreased on the previous month

Current growth rates

The hottest local markets are clustered in the North East and Scotland: Sunderland leads with annual price growth of 12.7%, followed by Renfrewshire (11.0%), Perth & Kinross (10.8%), County Durham (10.4%) and Halton (10.2%). At the other end, weakness is concentrated in London and the South East: Eastbourne is the steepest faller at –10.5%, while Wandsworth (–6.4%), Hammersmith & Fulham (–5.3%), Barnet (–4.7%) and Brent (–4.7%) are also in decline. In short, growth is strongest across northern and Scottish authorities, while several London boroughs are still sliding.

Affordabilty of housing

Affordability has improved from its 2022 worst but remains stretched: the national HAF (price ÷ median annual pay) sits a touch above its long-run average. London is still the clear outlier, now around the mid-teens on the HAF, down from its peak but far higher than anywhere else, followed by the South East/East/South West in the ~10–12 range. The Midlands, North and devolved nations cluster lower at ~6–8, with the North East at the affordable end near ~6 and Northern Ireland mid-pack. The South–North affordability gap, which peaked around ~2.1–2.2 in the late 2010s, has narrowed steadily since 2022 to roughly ~1.7–1.8—homes are still less affordable in the South, but the differential is clearly shrinking.

Predictions

Overall

The model points to modest nominal growth from a current c. £270k to £274k in 1 year, £282k in 2 years and ~£296k in 5 years, implying roughly 1–2% a year—a gentle grind higher rather than a surge.

Regional

Short term (next 12 months). The model has the UK drifting higher at low-single-digit rates, led by the North East (~+2.5%), North West (~+3%), West & East Midlands (~+2½–3%), Wales (~+2½%) and Yorkshire & Humber (~+2½%); the South West is a touch firmer (~+2–3%). London is the weak spot (about –2% overall, with flats ~–2% to –2½%), while the South East/East of England are broadly flat-to-+1%.

Medium term (2–3 years). Momentum broadens with cumulative gains of ~6–9% across the North & Midlands (NE, NW, Y&H, West Mids), ~6–7% in the South West and ~6–9% in Wales/Northern Ireland; Scotland is steadier at ~3–4%. London remains roughly flat to slightly negative over this horizon (flats weakest), and the South East/East of England notch ~3–5%.

Long term (5 years). The strongest cumulative rises are projected in Northern Ireland (~+18%), the North East/North West (~+15%) and Yorkshire & Humber (~+14%), with the West/East Midlands in the ~+10–12% range and the South West/Wales around ~+9–13%. The South East/East of England are softer (~+5–7%), and London is essentially flat overall (~–1%), with a clear mix by type: flats negative, while detached/semi-detached eke out small gains.

Local

12-month outlook (to 2026-07-01). The model’s top risers are Oldham (North West, +7.17%), Warwick (West Midlands, +5.58%), Chelmsford (East of England, +5.15%), Bromley (London, +5.01%) and Knowsley (North West, +4.60%), a broadly northern/Midlands tilt with a couple of southern outliers. The weakest are heavily concentrated in Scotland and London: South Ayrshire (–8.56%), City of Aberdeen (–7.41%), Brent (–7.35%), Tower Hamlets (–6.12%) and Aberdeenshire (–5.85%).

24-month outlook (to 2027-07-01). Strength stays focused in the North West and nearby: Oldham (+11.03%), Warrington (+8.74%), Cheshire East (+8.41%), Knowsley (+8.37%), with Warwick (West Midlands, +9.76%) also prominent. The laggards are again London/Scotland heavy—Tower Hamlets (–9.92%), City of Aberdeen (–10.49%), South Ayrshire (–8.11%), Barnet (–6.98%) and Hammersmith & Fulham (–6.48%)—suggesting continued south-eastern and North Sea-exposed softness.

60-month outlook (to 2030-07-01). The biggest cumulative gains cluster in the North West and Northern Ireland: Oldham (+26.16%), Knowsley (+22.37%), Bolton (+21.84%), plus Ards & North Down (+23.90%) and Lisburn & Castlereagh (+20.58%). The deepest projected declines are concentrated in London and Scotland—Tower Hamlets (–19.71%), Barnet (–8.79%), Sutton (–6.22%), City of Aberdeen (–21.34%) and South Ayrshire (–6.08%)—highlighting the model’s expectation of a prolonged divergence. Uncertainty is greatest at this horizon (wide CIs), so these should be viewed as directional signals, and to be taken with a big pinch of salt.