British Housing Market Faces Rising Prices Amid Government Construction Shortfalls

The British housing market is set for a steady climb this year, with experts predicting a 3.5% rise in home prices across the country. This growth is fueled by expectations of falling borrowing costs, as the Bank of England plans to gradually cut interest rates throughout 2025. Homebuyers could see prices continue to climb over the next few years, with forecasts pointing to increases of 4.0% in 2026 and 3.5% in 2027, keeping the market dynamic but competitive.

Yet beneath the surface, a pressing supply crunch threatens to hold the market back. Prime Minister Keir Starmer’s bold promise to build 1.5 million new homes by 2029 is facing serious headwinds. According to a recent Reuters poll, industry experts believe the government will only hit about two-thirds of this target, with estimates ranging between 700,000 and 1.3 million new homes. This gap highlights the challenge of ramping up construction in an industry that has struggled to meet demand for decades.

Russell Quirk from estate agency eMoov doesn’t mince words, calling the government’s housing target “a fantasy.” He points to a lack of capacity and motivation among the UK’s largest homebuilders, painting a sobering picture of why supply won’t keep pace with demand. Historically, the UK hasn’t managed to complete over a million homes in a five-year stretch since the late 1970s showing just how ambitious the current goals really are.

On the bright side, the outlook for first-time buyers offers some hope. Most experts expect mortgage affordability to improve as interest rates ease and lenders compete more aggressively. However, rising rents especially in urban areas where demand is highest are expected to climb even faster, making it tougher for many to save for a deposit and get on the property ladder.

The rental market faces its own hurdles, with new regulations and tax changes pushing some landlords out of the market. This shrinking supply is likely to drive rents up further, adding another layer of pressure on those trying to find affordable housing.

In short, the British housing market is at a crossroads. Falling borrowing costs may open doors for buyers, but the persistent shortage of new homes and soaring rents paint a challenging backdrop. Without a major boost in construction and rental supply, the government’s housing ambitions could remain out of reach, leaving affordability a pressing concern for years to come.