According to Savills, the future for the UK housing market in 2024 and later looks more positive, leading to an increase in their forecast for average house prices. They now expect a 2.5% rise in 2024, up from an initial prediction of a 3% decline, with an overall growth of 21.6% by the end of 2028, which is an increase from their previous estimate of 17.9%. However, the real estate market is still vulnerable to short-term changes, especially with rising debt costs and political uncertainty as the general election approaches.
The anticipated improvement in the economy and a series of base rate reductions from 2025 onwards are seen to set the stage for more significant growth, especially in regions away from London, where housing remains more affordable. Property transactions are projected to go up from last year’s forecast, reaching 1.05 million in 2024.
Lucian Cook, head of residential research at Savills, notes that 2024’s outlook has become more favourable compared to their last review in November 2023. This improvement is attributed to a slight reduction and stabilization in mortgage costs and a modest enhancement in economic growth forecasts. This translates to a conservative rise in house prices for the current year, with stronger growth projections in the years to follow.
Changes in mortgage rates have already influenced the market, with mortgage approvals climbing above 60,000 per month, and an annual house price growth reaching 0.6% at the end of April. Nonetheless, Cook warns of potential rate and price fluctuations due to global economic factors and the impending election later in the year.
Future Predictions Beyond 2024
With an uplifted forecast, Savills anticipates a more balanced distribution of growth over five years, jumping from a 17.9% to a 21.6% increase. They speculate that an economic upswing in 2025 and 2026 will boost consumer confidence and sustain housing demand.
Cook wraps up by asserting that the base rate cuts and overall economic improvements will allow for more substantial growth from 2025 onwards. However, by the end of the five years, affordability could become a restricting factor, particularly in markets like London and the South East where budget constraints are tighter.
