Savills’ respected research department has revised downwards its forecast for prime housing markets in London and the south of England.
Modest price falls are expected across prime markets in London and the South, while values across the North, Midlands, Scotland and Wales are forecast to remain flat, it says.
This is a downgrade from the previously anticipated 1.5% growth for regional markets.
“Market fundamentals have significantly shifted since the beginning of the year” admits Frances McDonald, director of residential research at Savills.
“Expectations of falling inflation and easing mortgage rates have been replaced by a more uncertain backdrop due to the conflict in the Middle East, with higher borrowing costs and the possibility of a change in political direction domestically. As a result, the short term outlook has weakened across all prime markets.
“However, the underlying drivers of demand remain in place in the medium term, and we expect a gradual recovery as conditions stabilise, with values picking up more significantly from 2028 onwards.”
Prime central London – no growth until 2028
Prime central London (PCL) is expected to be comparatively insulated from rising mortgage rates, given its reliance on equity-rich buyers. Instead, weaker sentiment and domestic political uncertainty are likely to be the dominant influences on values.
Savills has forecast a -3% fall in values this year (previously it forecast —2%), with growth forecast to pick up from 2028 onwards.
“Prime central London has already been through a significant period of repricing, having absorbed a prolonged period of tax and regulatory change.
“As a result, prices in PCL remain around 25% below their 2014 peak, causing more value driven buyers to re-enter the market.
“This, combined with London’s longstanding status as a global safe haven, and a lack of high-quality turnkey stock, is likely to limit the scale of any further falls,.”
Outer prime London markets remain more exposed to the cost and availability of mortgage debt, although less so than the wider mainstream market.
Buyers in these markets typically use lower loan-to-value borrowing, which has seen a less pronounced rise in rates.
Mortgage costs weigh most heavily on regional prime markets
Prime regional markets have seen the most significant revision to their near-term outlook.
Earlier expectations of a return to growth have been overtaken by higher borrowing costs and weaker sentiment, which is likely to have a more pronounced impact in debt-reliant markets, according to Savills.
London’s commuter belt and surrounding markets are forecast to face the greatest short-term pressure, as higher mortgage rates combine with reduced wealth flows from the capital.
By contrast, more affordable prime markets in the Midlands, the North of England, Scotland and Wales are forecast to prove more resilient in the short term, with prices forecast to remain broadly flat in 2026 and outperform over the longer term.
| 2026 | 2027 | 2028 | 2029 | 2030 | 5 years to 2030 | |
| Prime central London | -3.0% | 0.0% | 3.0% | 3.5% | 4.0% | 7.5% |
| Outer prime London | -2.0% | 1.0% | 3.0% | 4.0% | 4.5% | 10.8% |
| All prime regional | -2.0% | 2.0% | 4.0% | 5.0% | 5.0% | 14.6% |
Source: Savills Research
Note: these forecasts apply to average values in the second hand market, new build values may not move at the same rate
