Savills, a reputable agency, has issued a warning about the UK’s property market, forecasting a 3.0% decline in the average house price for the year 2024. This prediction comes with the added concern that inflation will further erode the value of properties. In a long-term outlook, Savills noted that property values managed to hold up slightly better than initially expected in 2023, particularly as mortgage markets settled during the spring and autumn months.
Taking the current rate of price falls into account, Savills anticipates that annual declines will reach 4.0% by the close of the year. This would result in a total decrease of 7.0% from the autumn of 2022 to the end of 2023. The property market has faced various challenges and uncertainties, impacting the pricing trends across the UK.
While the exact factors driving this decline may vary, it’s essential for both buyers and sellers to monitor these developments closely. Property values have been sensitive to economic fluctuations, government policies, and global events in recent years, and Savills’ projections serve as a valuable insight into the potential trajectory of the UK housing market. As property prices remain a significant aspect of the country’s economy and personal wealth, understanding these forecasts can help individuals make informed decisions in a rapidly changing real estate landscape.
Savills’ analysis and forecasts are particularly vital for those actively involved in the property market, including buyers, sellers, and investors. It’s essential to consider these predictions alongside other economic indicators and market trends when making property-related decisions. Staying informed about the evolving conditions of the UK housing market can provide a competitive advantage and help individuals navigate the complexities of the real estate sector.
In the coming year, Prime Central London is anticipated to experience minimal downward pressure on property prices. This is due to its lower reliance on mortgage debt and the attractive value it presents to both wealthy domestic and international buyers. Despite this, prices in this exclusive sub-market remain 19% below their 2014 peak, with the likelihood of a general election potentially delaying a full recovery.
Cash buyers have exhibited remarkable resilience in the past year, with a 3.5% increase in activity compared to the 2017-19 average. On the other hand, there has been a decline in the involvement of mortgaged buyers, particularly buy-to-let investors. As a result, overall property transactions for this year are expected to be approximately 20% lower than the levels recorded in 2022. These dynamics shape the property landscape in Prime Central London for the near future.
Property transactions are projected to hover around 1 million in 2024 and are expected to increase to 1.16 million by 2028 as mortgaged buyers gradually rejoin the market, slightly below the pre-pandemic average of 1.2 million.
Savills anticipates that the Bank of England will initiate rate cuts in the latter half of 2024, providing greater room for price growth in the mainstream property market from the end of the following year.
According to Savills’ forecast, house prices are set to grow by an average of 17.9% over the five-year period leading up to 2028, culminating in an average house price of £300,108 by the end of the forecast period.
Lucian Cook, head of residential research at Savills, states, “Interest rates are anticipated to have reached their highest point, and the most significant house price declines appear to be in the rearview mirror. Nevertheless, the initial rate cut is still on the horizon.
“This means that ongoing affordability challenges may lead to additional slight declines in house prices during the first half of 2024, resulting in an overall house price adjustment of around 10 percent from peak to trough.
“The prospect of a gradual rate reduction indicates a progressive recovery of purchasing power and a steady resurgence in demand. We anticipate growth to gain momentum as affordability pressures ease, with the most robust growth predicted for 2027, coinciding with rates reaching their long-term neutral level. Subsequently, we expect growth to stabilize, aligning with income growth trends.”