The UK housing market is poised for a rebound by the end of 2024, defying earlier gloomy predictions. According to the latest five-year forecast from Savills, house prices are expected to rise annually by an average of 2.5%, a significant improvement from the previously anticipated 3% fall projected just last November.
The revised forecast also points towards an upward trend in housing transactions, with Savills now expecting a total of 1.02 million homes to change hands by the year’s end, up from the earlier estimate of 1.01 million. This optimistic outlook signals a shift in momentum for the market, offering hope and opportunities for both investors and homebuyers alike.
Over the next five years, the forecast predicts a cumulative increase of 21.6% in UK house prices from 2024 to 2028. However, it’s important to note that these figures represent an average for the entire country, with significant regional variations expected. Therefore, prospective investors and homebuyers are advised to closely examine performance in individual locations to make informed decisions.
Regional Insights: Where the Market Shines
Savills’ breakdown of UK house prices on a region-by-region basis reveals intriguing insights into regional performance trends. Leading the pack is the north west of England, touted as a top investment destination due to its resilient market dynamics. Over the next five years, this region is expected to witness an impressive average cumulative price rise of 28.8%, offering buyers the prospect of robust capital appreciation.
Following closely behind is Yorkshire and the Humber, projected to experience a cumulative price growth of 28.2% during the same period. However, the picture is less rosy for London, which continues to lag behind in terms of growth potential. With predicted cumulative growth of only 14.2% over the next five years, the capital faces unique challenges that dampen its market performance.
Factors Driving Market Dynamics
Several factors have influenced the trajectory of UK house prices in recent months. Rising mortgage rates, triggered by fluctuations in the Bank of England base rate, initially hindered market growth. However, stability in interest rates since last August, coupled with a competitive mortgage market, has bolstered buyer confidence and reignited demand.
Political uncertainty has also played a role in tempering market sentiment, as stakeholders await the implications of upcoming general elections. Nevertheless, experts anticipate this uncertainty to be short-lived, paving the way for renewed optimism in the housing sector.
While affordability concerns persist, driven by higher borrowing costs and the ongoing cost of living crisis, the resurgence in housing transactions indicates a potential upswing in prices. Nonetheless, markets like London, characterized by exorbitant price levels, may tread a different path due to these affordability constraints.
Looking Ahead: A Brighter Future
Lucian Cook, head of residential research at Savills, offers a cautiously optimistic outlook for the housing market: “The outlook for 2024 has improved since our last forecasts…with greater potential over the following few years.” He highlights the role of competitive mortgage rates in bolstering buyer confidence and driving price recovery.
As the housing market navigates through uncertainties and challenges, the prospects for growth and stability appear promising. With strategic insights and a keen understanding of regional dynamics, stakeholders can capitalize on emerging opportunities and navigate the evolving landscape of the UK housing market.