UK Residential Housing Market Cautiously Optimistic

The outlook for the UK residential housing market remains cautiously optimistic, with modest price growth expected in the near term and more pronounced regional variations over the medium term. Following a period of adjustment driven by higher borrowing costs and economic uncertainty, the market is now poised to stabilise as interest rates begin to ease. Forecasts suggest that house prices will rise gradually—by around 2% next year—as lower mortgage rates and improving consumer confidence start to support demand. However, affordability pressures and uneven economic recovery across regions are likely to keep overall growth moderate.

Over the next five years, market performance is expected to diverge significantly between regions. London, which typically leads the market cycle, is forecast to see total price growth of around 14%, reflecting its already high values and slower pace of recovery. In contrast, areas such as Yorkshire and the Humber and the North East—classified as later-cycle markets—are projected to experience stronger gains of up to 29%. These regions are benefiting from relatively better affordability, increased inward investment, and strong local demand. Overall, the outlook points to a period of steady, sustainable growth rather than rapid expansion, underpinned by improving economic conditions and a gradual return of confidence to the housing market.