Savills has halved its house price growth predictions due to worsening buyer sentiment and concerns about the economy and tax environment.

The estate agent now believes the average house price will rise by 2% in 2026, rather than its earlier prediction of 4%.

Savills expects house prices to rise by 22.2% in the next five years, peaking in 2028 and 2029 at 5% and 5.5%, respectively.

The estate agent said housing market had been subdued in 2025 due to concerns about the economy, possible higher taxation and weakening buyer sentiment.

It now thinks that housebuyer demand and house price rises will be subdued into at least early 2026.

Savills head of residential research Lucian Cook said: “Our previous forecast assumed falling interest rates would boost borrowing and investment, supporting house price growth.

“However, with inflation stuck at 3.8%, economists are less confident about the pace in which rate cuts will happen. Higher interest and mortgage rates next year, as well a weaker labour market, with a slight rise in unemployment and slowing wage growth, are likely to constrain price growth.”

Cook added that the upcoming Budget on 26 November “continues to weigh on the market”, but that any announcements would likely impact the prime end of the market rather than standard residential transactions.

Over the longer term, while the pace of interest rate cuts is slower than expected, they will still play a role in boosting demand and driving price growth over the next five years, says Savills.

The firm thinks further cuts will be supported by the relaxation of mortgage lending rules earlier this year, allowing some buyers to borrow more relative to their incomes.