Knight Frank Cuts UK House Price Forecast as Oversupply and Pre‑Budget Uncertainty Weigh on Market

Knight Frank, one of Britain’s largest estate agents, has sharply downgraded its short‑term house price forecasts, saying a combination of high supply and weakening buyer confidence will limit growth this year and into 2026.

The firm now expects average UK house prices to rise 1% in 2025, down from a 3.5% projection published four months earlier. It warned that the upper end of the market will be particularly vulnerable: prices in Prime Central London are forecast to finish the year about 4% lower than at the start of 2025, while prime properties outside London — defined by values of £750,000 or more — are expected to fall around 5% this year.

Knight Frank pointed to a persistent oversupply of homes and a subdued flow of new buyers as the principal drivers of its downgrade. The firm said the number of new prospective buyers in the year to August was 8% lower than in the preceding 12 months, while new sales listings rose 6% over the same period. That imbalance, it said, is keeping downward pressure on prices.

Market participants and buying agents said political uncertainty has compounded the imbalance. Amid speculation about tax changes ahead of the autumn Budget, high‑value buyers are increasingly adopting a "wait and see" approach. Jonathan Hopper, chief executive of Garrington Property Finders, said "the laws of supply and demand are applying a strong gravitational pull on property prices" and added that many buyers at the top of the market are holding back because rumours of major tax changes are circulating ahead of the Budget on Nov. 26.

Hopper said deals continue to be struck but that sellers will increasingly need to be pragmatic about pricing. "On the price front, autumn will be about balance, not boom or bust," he said. He also noted that in some areas the number of sellers far outstrips serious buyers, prompting sellers to offer discounts or other incentives — for example, contributing to buyers' stamp duty costs — to complete transactions.

Political and fiscal developments have been linked to recent price weakness at the luxury end of the market. Average prices in Prime Central London fell 0.8% in the year to January, have declined about 5% since the pandemic and are down roughly 18% over the last decade, Knight Frank said. Possible policy moves under discussion include changes to non‑dom rules and an increase in the additional rate of stamp duty from 3% to 5% in October, both of which are expected to weigh on high‑value buyer demand.

Interest rates remain another factor tamping down activity. Although the Bank of England has cut interest rates three times since the start of the year, mortgage rates have changed little because cuts were already mostly priced into financial markets. Fixed mortgage pricing is tied to Sonia swap rates — interbank lending rates reflecting expectations of future policy — and the cost of fixed borrowing remains materially higher than the 1–2% deals widely available before 2022. That dynamic is constraining borrowing capacity and limiting upward pressure on prices.

Looking beyond 2025, Knight Frank projects a modest recovery. It predicts a 2% rise in average prices in 2026 and expects average UK prices to increase 18.7% between 2025 and 2029. The firm forecasts regional divergence: Greater London prices are projected to rise about 14.8% over the five‑year span, Prime Central London only 10.1%, while higher‑value country homes are expected to gain about 8.5%.

Estate agents and mortgage advisers are urging prospective buyers, homeowners whose fixed‑rate deals are expiring, and buy‑to‑let landlords to review their financing plans promptly. Guidance from consumer finance outlets and brokers suggests that borrowers who need to remortgage should compare rates, consult mortgage brokers and consider locking in new deals six to nine months ahead of a deadline, where permitted. Many mortgage deals allow arrangement fees to be added to the loan rather than paid upfront, although rolling fees into the mortgage increases the total interest paid over the life of the loan.

Buyers with transactions underway are also advised to secure mortgage terms early to understand monthly payments and avoid overstretching, given the potential for further price adjustment. Buy‑to‑let landlords, particularly those on interest‑only mortgages, face larger jumps in monthly payments than typical residential borrowers and are advised to act early to identify suitable specialist deals.

Analysts said the current market outlook reflects a convergence of cyclical and structural factors: a residual stock overhang from an April 2024 stamp‑duty incentive that prompted accelerated listings, delayed listings pushed into 2025 after last year’s general election, and an increase in landlord selling driven by tougher regulation. Those supply effects, combined with fiscal uncertainty and sticky mortgage costs, have created the conditions for a price‑sensitive autumn housing market.

While Knight Frank’s short‑term downgrade signals softer conditions for parts of the market, the firm’s medium‑term forecast still points to modest cumulative gains through the latter half of the decade, with performance varying by region and price segment. Policymakers, lenders and market participants will be watching the November Budget and mortgage pricing closely for signals that could either alleviate or exacerbate current imbalances.