First-time buyers to lead the recovery
Despite economic and political disruption, on the face of it, housing market activity has held up surprisingly well. In the 12 months to the end of August, completed transactions were close to 1.19 million, almost bang in line with the 2017–19 average.
But mortgage approvals began to fall in May of this year, as interest rates increased. That will start affecting transaction volumes in the fourth quarter, given the length of time it takes for sales to complete.
That also points to lower activity next year. Indeed, we expect falls in activity from all mortgaged buyer groups in 2027, as higher rates persist.
Transaction volumes should pick up from 2028. In total, we think that annual transactions in the UK will exceed 1.2 million in 2030 and 2031. But the recovery won’t be uniform.
There will be regional differences, which both follow the expected regional patterns of price growth and the unique challenges in London.
London has seen the biggest fall in activity in recent times. Transactions in the capital were down by 9% year-on-year in the 12 months to the end of June.
But in all other regions, activity has either been flat or increased slightly. Wales and Yorkshire and the Humber have both seen a 4% increase in activity levels. This adds weight to the theory that the more affordable regions are more able to weather a higher interest rate environment, and will be most resilient over the next five years.
Buyer Types: the headlines
We expect considerable variation by buyer type too.
First-time buyer activity is currently only 7.5% below 2021 levels. This is despite higher mortgage rates, slightly more exposure to stamp duty and the loss of Help to Buy. As rates fall in the second half of our forecast period, first-time buyer numbers should climb even higher, aided by the Your First Home programme in England.
In contrast, home mover numbers have fallen by more than a third since 2021. They will need to see a period of prolonged price growth to bring them back into the market in greater volumes.
Mortgaged buy-to-let purchases have almost halved. Landlords will be particularly cautious as rental reform beds in. And we don’t foresee private investment activity returning to previous levels.
Buyer Types: the detail
First-time buyers: Regulation relaxation and policy support
Although monthly mortgage repayments have climbed in recent months, first-time buyer deposit affordability is at its best level since 2008. Thanks to less stringent mortgage stress testing and relaxed restrictions on high loan-to-value lending, first-time buyers have been taking on larger loans in proportion to the value of their properties, reducing the time needed to save a deposit.
That this trend has persisted even as mortgage rates climbed higher in Q2 2026 has given us confidence that this buyer group will only see small falls in activity in 2027. We believe they will lead the recovery from 2028 as rates start to ease.
First-time buyer numbers will get a further boost from the government’s new Your First Home scheme, aimed at supporting the new homes sales market.
The scheme is more limited in scope than Help to Buy thanks to regional price and income caps. But we still think it will support over 20,000 sales per year by 2029, of which around 50% will be truly additional. As a result, we expect first-time buyers will be the largest buyer group from 2029 onwards, overtaking cash buyers for the first time in 30 years.
Home movers: the missing market
Activity from home movers has remained subdued. Unlike first-time buyers, changes to mortgage regulation have done little to increase transaction numbers, with volumes remaining stubbornly below the 2017–19 average.
If activity in this buyer group had followed the pre-pandemic norm, there would have been almost 250,000 more transactions in the UK over the last four years. But the need to budget for higher costs on existing mortgages, and the lack of significant house price growth to build equity, has pushed out the plans of many to take the next step on the housing ladder.
Releasing this latent demand will require a period of sustained house price growth and improved mortgage affordability. We don’t expect to see this until 2029. But there is potential for a sharp rise in activity in the second half of our forecast period, as pent-up demand from discretionary movers is released.
We expect activity from cash buyers to drop back slightly from recent levels. While there may be more opportunistic cash buyers in the market over the next 18 months, by 2029 they will be squeezed out by increasing numbers of mortgaged owner-occupiers.
Recent policy changes, such as the second home council tax premium and increased regulation of the private rental sector, will dampen appetite in parts of the market that have previously seen strong activity from cash buyers. And it is hard to see the number of downsizers increasing in the absence of any new policy measures.
Mortgaged buy-to-let: a structural shift
Although the profit on a buy-to-let property at point of purchase has climbed from the lows of 2023, the average profit of 4.3% of gross rental income is a far less appealing prospect than the average of 20–25% in the 2010s. This has been compounded by the announcement in the Budget of a further 2% tax on income from property from April 2027. We do expect that rental yields will climb over our forecast period, but are unlikely to offer the same premium over other, less risky forms of investment.
As a result, mortgaged buy-to-let volumes will remain below the long-term average throughout our forecast period, only rebounding to 60,000 transactions by 2030. Landlords with larger portfolios will make up the bulk of transactions, as part of the ongoing professionalisation of the private rented sector.
Note: These forecasts apply to average values in the second-hand market. New build values may not move at the same rate
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