Economic summary

News

Since the last post the UK economy has exhibited modest growth alongside mounting challenges. The International Monetary Fund (IMF) revised its 2025 GDP growth forecast upward to 1.2%, attributing this to strong first-quarter performance. However, inflation rose to 3.5% in April, driven by increased energy and water bills, higher business taxes, and a substantial minimum wage hike, complicating the Bank of England’s monetary policy decisions. In response, the Bank reduced the Bank Rate to 4.25% in early May but signalled caution for further cuts this year.

The business landscape has also faced significant headwinds, particularly in retail and manufacturing sectors. Major retailers, including Poundland, announced multiple store closures due to rising operational costs and weakened consumer spending. The S&P Global UK Composite Purchasing Managers’ Index indicated a slight easing in the business downturn, with the services sector showing modest growth, but manufacturing continued to decline, with job cuts at one of the fastest rates since the global financial crisis.

Amid these challenges, the government advanced its economic strategy by securing trade deals with the US, India, and the EU, aiming to bolster international trade relations. While these agreements are not expected to significantly boost GDP in the short term, they are seen as steps toward economic recovery and global reintegration.

Indicators

• Average house price rose to £271 k in March.
• Mortgage rates for both 60 % and 95 % LTV mortgages have continued their downward trajectory, now at approximately 4.22 % (-0.10 ppt) and 5.32 % (-0.12 ppt) respectively.

Predictions

Overall

House prices are set to continue their climb over the next two years, with the strongest momentum through 2026. After rising from £271 k today to about £283 k in a year’s time (+4.5 %), growth accelerates to £313 k by spring 2027 (+15.4 % total). Thereafter, annual gains moderate but remain positive, taking the average UK price to £355 k by March 2030 (+31 % over five years).

Regional

Our regional breakdown shows positive price growth across all parts of the UK over the next 12 months, but with wide variation:

• Top-performers (1 yr):
  • East Midlands (≈ 6.5 %) and South West (≈ 6.4 %) lead the pack, reflecting strong affordability and ongoing demand outside the capital.
  • West Midlands (5.9 %) and East of England (5.3 %) follow closely.
• Lagging regions (1 yr):
  • London (2.1 %) and the South East (0.9 %) post the smallest gains, constrained by high price bases and tighter budgets.

Looking further ahead:

Long term (5 yrs): the East of England dominates with nearly 38 % total growth, followed by the South West (35 %) and East Midlands (35 %). The North East lags at around 17 %, and London again posts the slowest long-run advance (≈ 23 %).

Medium term (2 yrs): the East Midlands and North West surge with cumulative rises of ~19 % and ~18.5 % respectively, while London remains under 8 %.

Local

Drilling down to local authority forecasts:

12-Month Outlook (to Mar 2026)

West Oxfordshire and Horsham (both -0.4 %)
High-price South East markets and former commuter hotspots are seeing affordability pressures and subdued demand.

Highest growth in:

Bath and North East Somerset (+9.7 %)

Cotswold (+8.3 %)

Hinckley and Bosworth (+8.1 %)

Worcester (+7.9 %)

Mid Devon (+7.7 %)
These areas combine strong employment markets with attractive living environments and remain within commuting distance of major cities.

Weakest growth in:

Barking and Dagenham (-2.8 %)

Gosport (-1.1 %)

Crawley (-0.7 %)

24-Month Outlook (to Mar 2027)

• Top areas:
  • Stockport leads on +25.8 %, joined by Blaby (+23.4 %) and several Cheshire/Greater Manchester boroughs at ~23 %.
• Bottom areas:
  • London boroughs (Wandsworth, Kingston upon Thames, Barking and Dagenham, Lambeth) all under 7 %, reflecting the city’s stretched affordability.

60-Month Outlook (to Mar 2030)

• Strongest five-year growth clusters around the East of England commuter belt:
  • Cambridge (+47.5 %), Brentwood (+47.1 %), St Albans (+45.0 %), Epping Forest (+43.4 %), Hertsmere (+43.3 %).
• Slowest five-year growth remains in the North East post-industrial heartlands:
  • County Durham (+15.6 %), Hartlepool (+15.3 %), Darlington (+15.0 %), Tyne and Wear (+14.9 %), Sunderland (+13.6 %).

Note: High-value anomalies (e.g. Kensington & Chelsea, City of London) continue to be excluded from local rankings due to price-point volatility skewing averages.

Conclusion

The latest model reinforces a clear theme: regional markets outside of London are where both short- and long-term house price gains are strongest. Commuter belt and “lifestyle” locations in the Midlands, South West and East of England consistently rank at the top of our forecasts, while inner-city London and North East post-industrial areas trail behind.

As ever, local fundamentals—employment growth, infrastructure projects, planning constraints—and macro drivers—interest rates, inflation, fiscal policy—will continue to shape these trajectories. We’ll return in July with updated ONS data and model refinements. Stay tuned!

Economic summary

News

Since the last time this blog was updated, there hasn’t been too much positive news for the economy…

From the recent budget, Welfare reforms stole the headlines, hoping to save £3.4bn net by 2029-30. There are cuts to be made to departmental spending, although there is also an increase in defence spending. Finally, there is to be an introduction of more planning reforms, which should hopefully boost housebuilding in the UK by 305,000 homes a year by 2029.

Post budget, the OBR released its judgement; GDP growth was revised down for this year, from 2% to 1%, and inflation was revised up from 2.6% to 3.2%. However, the OBR expects inflation to return to the target rate (approximately 2%) from 2027 onwards. These revisions mean that tax revenues as a share of GDP are forecast to reach a historic high of 37.7% in 2027/28—a level last seen in the 1950s.

Aside from domestic policy, on the international stage there doesn’t seem to be a decrease in geopolitical tensions any time soon, with no sign of a peace deal between Russia and Ukraine and the introduction and ramping up of tariffs by Trump – Happy Liberation Day.

Indicators

In terms of housing indicators, there was a slight uptick in the average house price to £269k (January). Mortgage rates (both high and low LTV) decreased from the previous month, whilst mortgage approvals remained flat.

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Predictions

Overall

Positive growth is forecast for this current year, with steady growth up to the back end of 2027, where the average house price should breach the £300k mark for the first time.

Regional

There is forecasted house price growth for all regions and house types over the course of the next 12 months. However, there is a forecast to be a slight downtick in the next 6 months for houses in the East of England, North East, and Wales.

In the medium-term (24–36 months), big growth is predicted for the East Midlands (19%), Scotland (19%), and the South West (18%). In the long-term house price growth is predicted to fall slightly, though it’s predicted that the South West (16%) and the East Midlands (16%) have the highest growth rate. The North East looks to provide the slowest growth over the 5-year period, although it has seen rapid growth since the end of COVID-19 lockdowns, benefiting from the shift to hybrid/remote work and the “race for space”.

Local

Looking at the model’s forecast for medium-term growth (24 months), areas predicted to produce high growth are Northumberland, Angus, and Camden (I’ve left out K&C and CoL for reasons which I’ll mention later on*). In contrast, the lowest growth is forecast for Babergh, Dover, and Hartlepool. There still appears to be a trend of rising house prices in areas where hybrid working is most effective—specifically, in more rural locations that are within a commutable distance to cities. In the last release on this subject from the ONS, this hybrid pattern looks to have remained at around 30% of the workforce.

In terms of long-term growth, Elmbridge, Camden and South Derbyshire place top. South Derbyshire has seen strong house growth for the last couple of years from 2021 onwards: £209, £225, £245, £240 and now £254, with that trend set to continue. Prices in Camden and Elmbridge have remained fairly stable over the last few years, although they are expected to see strong long-term increases.

When it comes to local price predictions, areas of London feature quite highly when it comes to leading the predictions over the short and long-term. This is likely due to a reversal or stabilisation of trends observed over the last few years, where remote work (WFH) has become more feasible and outdoor space is increasingly prioritised. In terms of the weakest long-term house price growth, it tends to be the areas with higher unemployment and a decreasing/stagnating population.

*It’s important to note that the average house price in Kensington and Chelsea is currently £1.12m, down from its highs of approximately £1.6m between 2022 and 2023. The model therefore expects substantial recovery potential, though it’s worth keeping in mind that these averages can be skewed by high-value transactions – including one house that sold for £73.2m, which might not be for everyone…

Welcome to the September edition of our UK house price predictions update. As always, we’ll be examining the top and bottom 5 places for predicted house price growth over various time intervals, and we’ll compare these to the predictions made in the last month (August). We will also be analyzing the broader regional trends across different house types to provide a comprehensive view of the housing market’s future trajectory.

UK Overall Prediction

The updated prediction for house prices by house type across the UK reveals a consistent upward trend across all categories. Detached houses continue to show the highest predicted average price growth over time, while flats demonstrate slower but steady growth. The 95% confidence intervals suggest that despite some variability, the overall market trend remains positive.

Regional Predictions

Highlights from the Regional Data Table:

• London continues to predict strong growth in multiple house types, especially semi-detached houses, across different time intervals.
• Scotland stands out with steady and significant growth predictions, especially for detached and semi-detached houses.
• The North East shows improved growth predictions over the long term, indicating emerging opportunities in the region.
• East of England continues to show slower growth in some segments, notably flats, with some short-term negative predictions.

Overall Observations

• London’s house price growth continues to lead the pack, showing substantial expected increases in the next 5 years, particularly for semi-detached and detached houses.
• Other regions such as Scotland and the North East are showing more steady, long-term growth, suggesting potential investment opportunities in these markets.
• The East of England and the South East exhibit slower growth in certain house types, indicating a more cautious outlook for these areas in the coming years.

The Winners and Losers

Comparison to the August post:

The 6-month prediction still sees London boroughs leading the pack, especially Hackney and Westminster, which continue to exhibit strong expected growth. However, there’s a slight decline in some of the lower-ranking areas, suggesting increasing divergence between high-growth and low-growth areas.

The 12-month predictions show increased growth for London’s semi-detached and detached houses, with Hackney topping the list again. The bottom places have shown a slight improvement, indicating that while growth remains slow in some areas, the decline is not as steep as previously predicted.

The 24-month predictions have grown even more optimistic for London areas, with Hackney and Camden showing significant increases in expected growth. This suggests continued strong performance in these markets, while the bottom regions continue to show very modest positive growth.

The 60-month predictions highlight exceptional growth expected in London boroughs, especially Hackney and Islington, which dominate the top spots. Scotland, particularly Aberdeen, continues to show positive growth but at a much slower pace compared to London.

UK Overall Prediction

As we move further into 2024, UK house prices continue to capture attention, with nuanced forecasts over the next several years. Based on the data available, it’s clear that the UK housing market is likely to experience both growth and contraction, depending on regional dynamics and property types. From the general outlook, detached homes appear to be leading the charge in terms of growth, while flats, particularly in certain regions, face potential stagnation or even declines.

Global economic factors such as inflation, interest rates, and energy costs are likely to play a significant role in shaping the property market in the UK over the coming years. The recent interest rate hikes, designed to control inflation, could impact mortgage affordability, slowing demand in certain areas. On the other hand, population shifts towards suburban and less dense areas continue to drive growth, particularly for larger homes.

The forecast for detached homes, especially in London and some suburban regions, remains robust, with substantial growth projected over the next five years. This growth might be tempered by more conservative prospects for flats and terraced homes in certain regions, especially those that have already seen steep increases in recent years.

Regional Predictions

The regional breakdown of predictions highlights significant disparities in expected price changes. According to the predictions, London is set for a mixed performance, with a modest overall growth prediction of 2.4% over the next six months, but some segments of the market could experience a downturn. Detached homes in London, for instance, are expected to decline by 0.7% in the first 12 months, before rebounding later.

Scotland, on the other hand, is showing more promise, with growth predictions consistently higher than many other regions. Over the next 12 months, house prices in Scotland, overall, are expected to rise by 4.8%, with detached homes forecasted to grow by 5.5%. Other regions, such as the North East and Yorkshire, also show solid growth potential, driven by lower property prices compared to the South East and London.

However, the data also show potential negative growth in areas such as the East Midlands and East of England, especially for flats and terraced homes, suggesting these regions might face headwinds in the short term. This highlights the importance of both location and property type when evaluating market predictions.

The Winners and Losers

From the predictions, some areas are poised for substantial growth, while others might struggle in the coming years. Looking at the six-month forecast, Hackney, particularly terraced homes, stands out as a key “winner.” With a projected growth rate of 8.7% in some sectors, Hackney continues to benefit from its appeal as a vibrant, well-connected area in London. Other areas such as Westminster and Camden also show strong growth predictions, driven by continued demand for detached and semi-detached homes in prime central London locations.

On the other hand, areas like Aberdeen in Scotland could see a contraction in the near term. Predictions indicate that the City of Aberdeen’s housing market might shrink slightly, with overall growth predicted to be negative in some cases, such as flats declining by as much as -2.5% in the next six months.

The longer-term predictions tell a similar story, with Hackney again leading the charge. In the 24-month forecast, Hackney’s terraced homes are predicted to experience a staggering 16.6% growth. Meanwhile, the North East’s County Durham, Scotland’s Aberdeen, and even Causeway Coast and Glens in Northern Ireland show negative or neutral growth over the same period.

The five-year outlook shows even more pronounced disparities. Hackney’s housing market, particularly detached homes, could see growth exceeding 46%, while regions such as Aberdeenshire and Durham may face more muted increases, with flats in Aberdeenshire forecasted to grow by just 10.5%. The long-term regional variation underscores the importance of strategic investments, with London continuing to dominate in high-growth areas, while certain regions of Scotland and the North East face significant challenges.

In conclusion, the UK housing market remains diverse, with some areas expected to thrive, particularly in London, while others, such as Aberdeen, may face hurdles. Investors and homeowners should keep an eye on these regional trends and plan accordingly to navigate the complexities of the housing market over the next five years.