Estate agent Savills warns house prices will fall 1.5% next year and not recover until 2028 amid Middle East war

Savills projects UK house prices will drop a further 1.5 per cent in 2027 — a £5,500 hit to the average home — before any recovery begins in the second half of 2028, with the Middle East conflict keeping mortgage rates elevated and deals not expected to dip below 5 per cent before early 2028. The Bank of England is expected to raise the base rate to 4 per cent on Thursday, piling further pressure on the 2.3 million households facing sharp repayment increases as they come off fixed deals next year.

London homeowners face the bleakest outlook, with the capital's prices forecast to rise just 8.1 per cent by 2031, against 23.3 per cent in the North West.

Savills does expect a five-year rebound of 15.8 per cent — around £56,500 — by 2031, driven by first-time buyers taking advantage of government schemes and cheaper deposit requirements.

Britain's biggest housebuilder Barratt Redrow also reported today that completions fell 12 per cent to 3,223 homes in the first 17 weeks of its financial year, with its boss Dean Banks citing 'continued pressure on affordability'.