By Jonathan Cable

LONDON (Reuters) - The outlook for British home prices has barely changed in the last three months on steady expectations for falling borrowing costs, according to a Reuters poll of property experts who said the government would achieve around two-thirds of its construction target.

Labour Prime Minister Keir Starmer has vowed to build 1.5 million homes over parliament's term, which ends in mid-2029 at the latest, but the poll median found the government would manage around only a million.  

None of the 11 respondents to an additional question saw the goal being fully met. Responses ranged from 700,000 to 1.3 million. 

"The government’s pledge of 1.5 million homes by the end of 2029 is a fantasy," said Russell Quirk at estate agency eMoov, who predicted a range of 950,000-1,050,000.

"The top 10 house builders neither have the capacity nor the P&L (profit and loss) motivation to deliver."

There were around 817,000 housing completions in the five years to 2024, according to government data. The last time there were more than 1 million homes completed in a comparable period was in 1976-1981. 

British homebuilder Persimmon did, however, say in March it would construct more houses this year and target improved margins after 2024 profit beat expectations, while rival Barratt Redrow last month reiterated its target to build around 17,000 homes this year.

With homes in short supply, the cost of buying one is expected to increase.

Nationally, home prices were predicted to rise 3.5% this year, matching a February forecast but above predictions in another Reuters poll for overall inflation of 3.0%. Next year they will increase 4.0% and in 2027 3.5%, the May 19-29 poll of 19 housing market experts predicted.

In London, house prices were seen rising 3.0% this year, 4.0% next and 3.8% in 2027.

ON THE LADDER

Asked what would happen to affordability for first-time buyers hoping to get on the property ladder, all but two of 15 said it would improve.

"Generally, mortgage affordability will improve for first-time buyers over the course of 2025," said Scott Cabot at real estate services firm CBRE.

"A continued fall in the base rate, along with an increasingly competitive mortgage market, will generally drive lower mortgage rates in 2025."

The Bank of England is expected to stick to one interest rate cut per quarter this year, with the next likely in August and then in November, ending 2025 at 3.75% compared with 5.25% before the reductions began.

Urban rents were seen rising even faster than home prices, making it harder for new buyers to save money for a deposit usually needed to get a mortgage. Many people, especially the young, prefer to live in cities.

Nationally, urban rents were expected to increase 4.3% this year while in the capital they will rise 3.7%.

"We expect rents to outpace inflation over the next few years, predominantly due to the lack of supply in the rental sector, but also due to higher costs eroding landlords' profit margins," said Aneisha Beveridge at estate agency Hamptons.

The government's planned Renters' Rights Bill will put additional conditions on landlords while tax changes will also have an impact, prompting some to leave the market.

Britain's housing market slowed in April after the end of a temporary tax break on home purchases which had seen buyers rush to complete transactions in previous months, the Royal Institution of Chartered Surveyors said earlier this month.

(Other stories from the Q2 Reuters housing market polls)

(Reporting by Jonathan Cable; Polling by Jaiganesh Mahesh and Renusri K; Editing by Alison Williams)