Housing transactions are predicted to reach 1.05 million this year, marginally up from the 1.01 million predicted at the back end of last year
Savills has today upgraded its five-year UK mainstream house price forecast to reflect the stronger than expected start to the year.
The agency expects house prices to increase 2.5% in 2024 – a big change from the 3% drop it predicted in November last year.
And it forecasts house prices will increase by an average 21.6% by the end of 2028 – again, above its earlier prediction of 17.9%.
Housing transactions are predicted to reach 1.05 million this year, marginally up from the 1.01 million predicted at the back end of last year.
The outlook for 2024 has improved since our November 2023 forecasts as mortgage costs have nudged down slightly and are much less volatile. The outlook for economic growth has also slightly improved, pointing to comparatively modest house price growth this year, with greater potential over the following few years, explains Lucian Cook, head of residential research at Savills.
Cook said: In November, a 75% loan-to-value mortgage from Nationwide on a 2-year fix cost 5.34%, and mortgage approvals were down below 50,000 per month. The higher cost of debt hampered demand and put downward pressure on prices. Nevertheless, the highly competitive nature of the mortgage market has meant that lenders have fairly aggressively priced in the possibility of cuts in bank base rate, causing buyer confidence, and prices, to recover somewhat.
Today, while the bank base rate remains at 5.25%, the cost of the same Nationwide two-year fixed-rate mortgage now sits at 4.84%, while a five-year fix carries an interest rate of 4.50%.
This has caused monthly mortgage approvals to rise above 60,000 in February and March, with annual house price growth standing at to 0.6% at the end of April.
However, continued uncertainty in the Middle East and higher than expected US inflation have meant that swap rates have continued to rise. As a result, we are unlikely to see a further meaningful decline in mortgage rates this year, with the potential for short term fluctuations in the cost of debt and house prices, as seen over the past week. Likewise, an Autumn election could impact sentiment towards the end of the year, though polling indicates that most buyers and sellers will have already factored in a change of government, which will minimise the impact, Cook added.