Savills upgrades UK house price forecast

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Savills, has just upgraded its five-year UK mainstream house price forecast. Sighting a stronger than expected start to the year and a slight improvement in lead indicators of demand.

Savills now expects house prices to grow 2.5% in 2024, a significant shift from the -3.0% forecast in early November 2023. This change is primarily due to falls in the cost of mortgage debt. By the end of 2028, they predict a growth of 21.6%, up from the previous prediction of 17.9%.

The number of housing transactions is also expected to rise, with forecasts predicting 1.5 million in 2024, a slight increase from the 1.01 million forecast at the end of last year.

Lucian Cook, head of residential research at Savills, attributes this positive outlook to lower mortgage costs and less volatility. He explains that the competitive nature of the mortgage market has led to aggressive pricing in anticipation of cuts in the bank base rate. This has resulted in a boost in buyer confidence and a recovery in prices.

However, Cook warns that continued uncertainty in the Middle East and higher than expected US inflation mean that we are unlikely to see a further significant fall in mortgage rates this year. He also notes that an Autumn election could impact sentiment towards the end of the year.

Looking to the longer term, Savills five-year UK forecast has been revised up from 17.9% to 21.6%, with growth expected to be more evenly distributed over the five-year period. Improving economic performance, combined with steady cuts to the base rate, are expected to support buyer sentiment from 2025 onwards.

However, Cook concludes that affordability constraints will become a factor towards the end of the five-year period, particularly in the already stretched markets of London and the South East.

The UK housing market outlook is looking brighter, with Savills predicting steady growth over the next five years.