Savills makes drastic U-turn on housing market forecast for 2024

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 grow 2.5% in 2024 - a big change from the 3% fall it forecast only in November.

And it predicts house prices will rise by an average 21.6% by the end of 2028 - again, above its earlier forecast of 17.9%.

Housing transactions are forecast to reach 1.05m this year, slightly up from the 1.01 million forecast 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 relatively modest house price growth this year, with greater potential over the following few years” explains Lucian Cook, head of residential research at Savills.

“In November, a 75% LTV 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 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.” 

Today, while the bank base rate remains at 5.25%, the cost of the same Nationwide two-year fixed-rate mortgage now stands 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. Consequently, we are unlikely to see a further meaningful fall 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. Similarly, an Autumn election could impact sentiment towards the end of the year, though polling suggests that most buyers and sellers will have already factored in a change of government, which will minimise the impact” continues Cook.

Savills five-year UK forecast has been revised up from 17.9% to 21.6%, and the distribution of growth is expected to be more even over the five-year period.

According to the agency, a stronger economic performance in 2025 and 2026 will support buyer sentiment.

Cook concludes: “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.”