House prices are expected to rise by 1.5% next year, with the more affordable regions outperforming the rest of the country as high mortgage costs continue to limit demand, according to the UK’s largest estate agency group.
Connells Group says there will be a slow recovery after what has been a disappointing year for property sales, with house price growth of 1% in 2026. This will then increase to 1.5% in 2027 and 2.5% in 2028 before easing back to 2% in 2029.
Higher mortgage costs hold back sales
It estimates that there will be around 100,000 fewer property transactions in 2026 than it was expecting at the start of the year, mostly because mortgage rates have been higher than anticipated.
Connells’ data shows the average mortgage rate paid by homebuyers rose from 4.14% at the beginning of this year to 5.22% in October. On a typical purchase with a 75% mortgage over 25 years, monthly repayments have increased to £1,224, compared with £1,115 a year ago and £874 in 2019.
Rather than accepting significant price reductions, the estate agency says many households have postponed moving. Wage growth has helped support affordability, but inflation has eroded property prices in real terms. Over the last five years, consumer prices have risen by 21.8%, compared with a 10.9% rise in average house prices.
Aneisha Beveridge, research director at Connells, says lower mortgage rates should encourage more households to move next year, although the outlook remains uncertain.
She warns, though: “If rates remain around 5%, the risk of small house price falls in 2027, rather than growth, increases significantly.”
However, she adds that by mid-2027, the last wave of homeowners on cheap five-year fixed mortgages will have refinanced onto more expensive deals. By then, she expects the shock of moving from historically low mortgage rates to begin to fade, although higher repayments will continue to squeeze household budgets.
Strongest house price growth in North East
There are likely to be marked regional differences, with stronger price growth in areas where homes are still relatively affordable.
Connells is therefore forecasting that some of the strongest growth will be in the North East, where prices will rise by 3% in 2026 and 2.5% in 2027. It expects a strong performance in Scotland, too, with growth of 2.5% in 2026 and 2027. And prices will increase by 4% in both regions in 2028, compared with a national average of 2.5%.
And over the four years to the end of 2029, its projections show cumulative growth of 13.1% in the North East and 12.5% in Scotland, against an average of 7.2%.
London prices, in contrast, are forecast to fall by 1% in 2026 before returning to growth next year. Outer London could see a 3% increase, compared with just 0.5% in Inner London, where higher property taxes and weaker investor and international demand will continue to constrain the market.
Property transactions also set to recover
Connells believes property transaction volumes will also recover, with around 1.1 million completions in Great Britain in 2027, rising to just under 1.2 million in 2028 as mortgage affordability improves and households make moves they had been postponing.
Sales volumes will then fall back to around 1.1 million in 2029 as uncertainty in the run-up to the next general election weighs on confidence, particularly in London and southern England, where buyers may be more concerned about potential property tax changes.
The group still believes sales will remain below the highs seen in 2021, as higher borrowing costs and stamp duty discourage some households from moving, even as market conditions improve.
