UK House Prices to Rise 1.3%, Lagging 3.1% Inflation in 2027

UK house prices are projected to rise by 1.3% this year, significantly trailing the 3.1% inflation rate. Prop News Time reports that this gap reflects persistent pressure from elevated borrowing costs. The market faces continued headwinds from cautious buyers and an uncertain economic environment.

A Reuters poll of sixteen property experts indicates that price growth will remain below inflation through 2027. Forecasts for next year stand at 2.0%, still lagging the expected 2.5% inflation rate. Growth is not expected to outpace inflation until 2028, when prices may rise by 3.3%.

Mortgage rates suppress buyer activity

Net mortgage approvals for house purchases fell to 56,100 in July, down from 58,200 in June. The average interest rate on new mortgages increased to 4.45% during the same period. These figures demonstrate the direct impact of high costs on transaction volumes.

The Bank of England maintained its key rate at 3.75% at its latest meeting. Governor Andrew Bailey warned that prolonged Middle East conflict could necessitate tighter monetary policy. This stance aligns with similar moves by the US Federal Reserve and the European Central Bank.

London prices face a 1.4% decline

London home prices are expected to fall by 1.4% this year, outperforming the national average negatively. A modest 0.9% increase is forecast for next year, reversing the current downward trend. These London-specific figures are weaker than those recorded in the previous June survey.

Builder cuts signal market weakness

Barratt Redrow, the UK’s largest homebuilder, reduced its forecast for home completions to 17,500-17,900 units. This represents a drop from the previous target of 17,700-18,200 homes for the year ending June 2027. The company cited planning delays and cautious buyers as primary factors for the revision.