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The UK Housing Market Forecast: A Promising Five-Year Outlook for Homeowners and Investors

The UK property market is poised for a resurgence, with average house prices projected to increase by £84,000 (23.4%) by 2029, according to the latest five-year forecast by property adviser Savills. With inflation returning to target levels and interest rates expected to ease, the market is set for steady growth. For prospective homeowners, current homeowners, and investors, this is a pivotal moment to assess market opportunities.

A Closer Look at the Numbers

Savills predicts an average annual house price growth starting at 3.0% in 2024, peaking at 5.5% in 2026, and tapering off to 3.0% by 2029. By the end of the forecast period:

• Average UK house price: £442,000, up from £358,000 in 2024.
• Base interest rate: Declining from 4.75% in 2024 to 2.00% in 2027 and stabilising thereafter.
• Mortgage rates: Falling from 4.56% to 2.64%, reducing borrowing costs.
• CPI inflation: Returning to a stable 2.0%, enhancing real-term affordability.

What’s Driving This Growth?

Economic Stability and Falling Interest Rates

As inflation stabilises and interest rates decline, borrowing becomes more affordable, encouraging more buyers to enter the market. This renewed affordability is expected to gradually bring home movers and first-time buyers back into the fold, stimulating market activity.

Return of Real Price Growth

The UK housing market has endured a challenging period, with house prices declining in real terms by 10.5% since their August 2022 peak. However, with inflation-adjusted price growth of 11% forecasted, values are expected to recover to pre-mini-budget levels.

Demand, Supply, and Affordability

Lucian Cook, Head of Residential Research at Savills, highlights the balancing act of demand, supply, and affordability. Reduced mortgage costs are already boosting buyer confidence, laying the groundwork for sustained growth.

Challenges on the Horizon

Despite this optimistic outlook, challenges remain:

1. Uneven Recovery: Transaction volumes are expected to remain slightly below pre-pandemic levels until 2028, with recovery varying across buyer types and regions.
2. First-Time Buyers at a Disadvantage: A lack of government support following the end of Help to Buy, combined with tighter regulations in the rental market, is likely to limit first-time buyer activity.
3. Regional Disparities: Growth will be strongest in more affordable regions like the North West (29.4%) and North East (28.2%), while high-cost areas like London and the South East will see comparatively modest increases of 17.1% and 17.6%, respectively.

Opportunities for Investors

For property investors, these market conditions create unique opportunities:

• Capital Growth: Regions such as Yorkshire and the Humber, the North West, and the North East offer strong growth potential.
• Affordability-Driven Demand: More affordable areas will attract buyers, making them lucrative for rental or resale investments.
• Tokenization: Platforms like Fractionex allow investors to own fractional shares of high-performing properties, bypassing traditional barriers to entry in regions with robust growth forecasts.

What This Means for Homeowners and Buyers

For Homeowners:

The projected growth offers an opportunity to build equity, especially for those in regions with higher forecasted appreciation. Upgrading or downsizing during this period could yield significant financial benefits.

For First-Time Buyers:

The easing of mortgage rates will provide some relief, but saving for deposits remains challenging, especially in the South. Exploring alternative financing options, such as shared ownership or tokenized property investments, could provide a pathway to ownership.

For Investors:

The UK’s regional variations in growth offer opportunities to diversify portfolios. Affordable areas in the North and Midlands are particularly attractive for long-term capital appreciation and rental yields.

The Future of Property Ownership: Tokenisation and Fractionex

The rise of tokenised property investment is reshaping how people engage with the real estate market. Platforms like Fractionex democratise access to property ownership, allowing individuals to invest in fractions of properties. This model aligns perfectly with market trends, offering exposure to growth regions without the need for full ownership.

As average prices rise, tokenisation provides a low-barrier entry point, enabling investors to benefit from price appreciation and rental income while diversifying risk.

The next five years promise significant opportunities for homeowners and investors alike. With house prices forecast to grow by 23.4% by 2029, the UK property market is poised for a steady recovery. For those looking to capitalise on these trends, understanding the regional variations and leveraging innovative investment models like Fractionex will be key to maximising returns.

Whether you’re a homeowner, first-time buyer, or seasoned investor, the future of UK real estate holds promise. Fractionex is here to help you navigate this evolving landscape, making property ownership accessible and rewarding for all.

Stay informed about the latest trends in the UK property market. Explore how Fractionex can help you seize these opportunities. Sign up today to start your journey towards smarter property investment.