House Prices Forecast Up 23.4% in 5 Years

London based estate agents, Savills, has issued its latest house prices forecasts.

Savills forecast that house prices in the UK will increase by 23.4% in the next five years.  With inflation now down below 2.0% pa and the Bank of England expected to cut interest rates by 0.25% pa tomorrow, there is a general expectation that interest will pick up in the property market again.

• Mortgage rates to fall on the back of interest rate cuts combined with wages inflation (i.e., pay rises) over the last few years will mean a push prices upwards.
• Stamp duty rates being maintained at the First-Time Buyer end will also help push prices up further up the property ladder.

What a 23.4% rise means?

• The average house in the UK is forecast to rise by £84,000 in the next 5 years.
• Property price rises will be slower in London and the South East as income multiples will still be high.
• Meanwhile, in the North, prices are forecast to rise by 29%.

In the short term, Savills forecast a 4% rise in 2025 (revised upwards from 3.5%) given the above as well as most workers not being hit directly by the Budget on 30 October 2024.

Comment

As ever in the UK and in the words of Mark Twain, “buy land, they’re not making any more”.

House prices are still 2.3% below their 2022 peak and with wage increases during the ‘cost of living crisis’ combined with interest rate cuts there is now room for a stable, upward trend over the next few years.

That said, we are still forecasting an economic slowdown over the next 12-18 months, so rises of no more than 3-4% pa is expected rather than another property bubble.