Budget uncertainty, higher-for-longer interest rates and weak buyer confidence prompt downgrade from estate agent.
Savills has halved its UK house price growth forecast for 2026 to 2 per cent, citing “weaker buyer sentiment” and uncertainty over the upcoming budget, which is expected to include potential changes to property taxation.
The revision comes amid growing concerns that the chancellor may introduce a “mansion tax” on properties valued above £2 million, alongside fewer-than-expected interest rate cuts next year.
The latest forecast compares with Savills’ previous prediction of 4 per cent growth and follows a similar downgrade from Capital Economics, which last week cut its 2026 projection from 5 per cent to 3.5 per cent.
“The upcoming budget continues to weigh on the market,” said Lucian Cook, head of residential research at Savills. “We’re going into [the new year] with relatively weak indicators around buyer sentiment. It’s impossible to say what will happen at the top end of the market because we don’t yet know what’s in the budget, but whatever comes is expected to act as a drag — and that will have a trickle-down effect into parts of the mainstream market.”
Cook said it would be wrong to blame the entire downgrade on budget uncertainty. Persistent inflation and a slower path for rate cuts, he added, were also holding back activity.
“We’re anticipating relatively weak economic growth next year. When you combine that with fewer-than-expected rate cuts and slower wage growth, people don’t get the boost in buying power or the feelgood factor to drive the market,” he said.
Despite its short-term caution, Savills still expects average UK house prices to rise 22.2 per cent over the next five years, though “real” price growth — meaning rises that outpace inflation — will not return until 2028.
The firm also expects the north-south divide in housing performance to persist, with Yorkshire, the northeast of England, Scotland and Wales tipped to be the top-performing regions over the next half-decade.
Sales activity is forecast to ease slightly, with transactions falling from 1.18 million to 1.15 million in 2026 as buyers rush to complete deals before any tax changes take effect. By 2030, however, Savills expects transaction levels to recover to around 1.19 million, close to the pre-pandemic average, supported by improved affordability as interest rates eventually fall.
