Savills upgrades its UK house price growth forecast

Property firm Savills has revised its five-year UK house price forecast, predicting a 2.5% increase this year, up from the -3% predicted in November 2023.

The firm says that by the end of 2028, house prices are expected to have grown by 21.6%, exceeding the previous forecast of 17.9%.

The improved forecast comes despite short-term uncertainties like potential fluctuations in borrowing costs and political uncertainty ahead of the General Election.

‘Outlook for 2024 has improved’

Lucian Cook, the firm’s head of residential research, said: “The outlook for 2024 has improved since our last (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 relatively modest house price growth this year, with greater potential over the following few years.

“In November, a 75% LTV mortgage from Nationwide on a two-year fix cost 5.34%, and mortgage approvals were down below 50,000 per month.”

He added: “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.”

Won’t be a ‘further meaningful fall in mortgage rates this year’

Savills is also predicting there won’t be a ‘further meaningful fall in mortgage rates this year’ but the cost of houses and debt will fluctuate.

It is also predicting a stronger economic performance in 2025 and 2026 which help support buyer sentiment.

Mr Cook said: “Improving economic performance, combined with steady cuts to the base rate, will open up greater capacity for growth from 2025.”

However, buyers will struggle with affordability, particularly in London and the South East.