UK Housing Market Slows as High Borrowing Costs and Inflation Bite

The UK housing market is experiencing a slowdown due to high borrowing costs and persistent inflation. According to a Reuters poll of 16 experts, home price growth is expected to be below projected inflation levels this year and next. The median forecast puts price growth at 1.3% in 2024 and 2.0% in 2025.

UK rental costs are forecast to increase 3.0% both this year and next, outpacing house price growth. High borrowing costs have pushed potential buyers into the rental market, leading to higher rents. The Bank of England has held interest rates unchanged, but Governor Andrew Bailey warns that prolonged conflict in the Middle East may require tighter policy.

Revised forecasts for prices and borrowing costs show a decline in home price growth. A September poll of 16 property market experts predicts a 1.3% increase in home prices this year, down from the 1.8% forecast in June. The median forecast puts price growth at 2.0% next year and 3.3% in 2028.

Marcus Dixon of JLL says elevated mortgage rates and a lack of stimulus mean prices are likely to remain broadly flat, with only modest increases potentially appearing from 2027. The UK housing market is experiencing weak demand, visible in lending and construction data.