Savills has revised its house price forecast to project a 2.5 per cent growth over 2024.
This is in contrast to the previous forecast in early November 2023, which projected a fall of 3 per cent in house prices over the same time period.
The revision was attributed by Savills to a fall in the cost of mortgage debt.
Additionally, the estate agency forecasted housing transactions to reach 1.05mn in 2024, slightly up from the 1.01mn forecast from the back end of last year.
Savills head of residential research, Lucian Cook, said: “The outlook for 2024 has improved since our last forecasts in November 2023 as mortgage costs have nudged down slightly and are much less volatile.
“The outlook for economic growth has also slightly improved, pointing to relatively modest house price growth this year, with greater potential over the following few years.
“In November, a 75 per cent LTV mortgage from Nationwide on a 1-year fix cost 5.34 per cent and mortgage approvals were down below 50,000 per month.
“The higher cost of debt dampened demand and put downward pressure on prices.
“However, the highly competitive nature of the mortgage market has meant that lenders have fairly aggressively priced in the prospect of cuts in bank base rate, causing buyer confidence and prices to recover somewhat.”
Savills explained that, while the bank base rate remains at 5.25 per cent, the cost of the same Nationwide 2-year fixed-rate mortgage now stands at 4.84 per cent, while a 5-year fix carries an interest rate of 4.50 per cent.
This has caused monthly mortgage approvals to rise above 60,000 in February and March, with annual house price growth standing at 0.6 per cent at the end of April.
Longer term
Savills five-year UK forecast has also been revised, increasing from 17.9 per cent to 21.6 per cent, and the distribution of growth is expected to be more even over the five-year period.
According to Savills, a stronger economic performance in 2025 and 2026 will support buyer sentiment.
Cook added: “Improving economic performance, combined with steady cuts to the base rate, will open up greater capacity for growth from 2025.
“But without the previously expected falls at the start of our forecast period, 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.”
tom.dunstan@ft.com
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