House prices to rise by 23% over the next five years – Savills

House prices to rise by 23% over the next five years – Savills

0:06 AM, 6th November 2024, About 2 hours ago

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House prices in the UK are forecast to increase by £84,000 over the next five years, according to a new report from property firm Savills.

With inflation returning to target and interest rates expected to decline, the housing market is poised for consistent year-on-year growth.

Savills is predicting a 4% increase in house prices in 2025, up from the previous forecast of 3.5%, and a total 23.4% rise by the end of 2029.

While the cost-of-living crisis and rising mortgage rates have impacted the market, the easing of inflationary pressures and declining interest rates are expected to boost buyer confidence.

House prices in the medium term

Lucian Cook, the head of residential research at Savills, said: “With less external noise, house prices in the medium term will be dictated by the fundamentals of demand, supply and affordability.

“The direction of mortgage rates has been key to buyer decisions over the past two years and decreased monthly mortgage costs are now feeding through into improved confidence amongst prospective buyers, prompting the moderate house price growth we have seen over the past few months.”

He added: “A steady improvement in affordability should allow for house price growth to gain momentum over the next couple of years.”

Mr Cook warns there is ‘potential for a bumpy ride’ and market will remain sensitive to short-term fluctuations in the cost of debt and changes to property taxation may cause some short-term disruption.

Dampen demand from buy to let investors

However, the recovery in transaction numbers is expected to be gradual, with home movers driving activity once mortgage rates stabilise.

First-time buyers, facing a lack of government support, are likely to see a slower recovery.

Also, increased regulation in the private rented sector and higher stamp duty surcharges of 5% on second homes are expected to dampen demand from buy to let investors.

Regional performance will vary, with more affordable regions in the North and Scotland outperforming the UK average, Savills says.

While London and the South East may see some short-term impact from the unwinding of the ‘race for space’, long-term growth will be constrained by affordability factors.

However, the strongest performance will be seen in the North where ‘mortgaged buyers are under less strain’.


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