Savills has forecasted a turnaround in mainstream house prices for 2024, projecting a modest decrease of 3% as borrowing costs start to ease in the latter half of the year.
Looking further ahead, a five-year growth of 17.9% is expected, equating to an average increase of £45,521 by the end of 2028.
This anticipated growth is attributed to a predicted decline in the average cost of mortgage debt towards 3%.
Regionally, Wales and the North East are set to witness the strongest price growth as the current cycle of regional price escalation concludes.
In the prime housing sector, Prime Central London (PCL) is anticipated to be the sole market to avoid a price dip in 2024, though its recovery may be dampened by political uncertainty and a heightened tax environment.
Nonetheless, prime regional house prices are likely to see only a minor fall of 1.5% in 2024, with a robust 18.6% growth over the next five years forecasted.
Savills has noted that UK housing market trends from the past year are predicted to endure, with the market reaching its lowest point around mid-2024.
PCL is expected to benefit from less dependence on mortgage debt and an attractive value proposition to a diverse range of affluent buyers. The average PCL property might appreciate by £800,000 over the forecast period.
Cash buyers have remained active, but reduced activity among mortgaged buyers, especially in the buy-to-let sector, is anticipated to result in a -20% dip in overall transactions compared to last year.
Transactions should stabilise at around 1 million in 2024, with a gradual increase to 1.16 million by the end of the forecast period.
Lucian Cook, head of residential research at Savills, said: “Interest rates are expected to have peaked and the worst of the house price falls look to be behind us, but the first cut to rates still looks to be some way off.” He further stated that the expected gradual reduction in rates suggests a slow but steady recovery in demand, with the most substantial growth projected for 2027.
Frances McDonald, director of residential research at Savills, added insight on prime markets, noting: “We continue to expect prime central London to outperform most other UK residential markets over the next five years.” She mentioned that despite a subdued recovery, PCL values are near their lowest, signaling an upcoming market correction.
As per Savills’ research, late-cycle dynamics indicate London and the South East may experience slightly larger price falls in 2024. However, from 2028 onwards, London is forecast to lead UK price growth due to demographic pressures and an improving economic forecast.
