Residential Market Up 18%
Despite initial worries of a housing market crash, a prominent UK estate agent remains optimistic, foreseeing the residential market up 18% by the end of 2028. Savills estate agents project a minor 3% dip in property prices next year, followed by a robust rebound, anticipating an 18% increase over the next five years. This positive outlook aligns with economists adjusting their forecasts in response to unexpectedly favourable market data.
Homeowners’ Gain
Savills estimates that, during this period, the average home will gain an extra £45,521 in value. This increase is expected to bring the average home value to £300,000 by the end of the decade. Several factors support this market growth, including strong wage growth, lower mortgage rates, and an influx of cash buyers. These elements collectively contribute to the market’s stability and upward trajectory.
The decrease in property transactions suggests that some sellers are holding off on selling, hoping for better prices in the future rather than settling for a lower offer now.
Economists are revising their predictions in light of this new data. For example, Capital Economics, which had initially forecasted a 5% fall in house prices for 2023, is now reconsidering, suggesting prices may remain flat for the year.
The house price index from Halifax reported a 1% increase in October. This marks a reversal of a six-month trend of falling prices. Both Halifax and Nationwide base their indices on in-house market data. The average house price is now around £281,974, which is 3.2% lower than the same period last year.
Residential Market Up 18%: Factors Behind Stability
Following the Bank of England’s decision to maintain interest rates at 5.25%, there is a positive trend. This decision offers a boost for mortgage borrowers.
Earlier predictions of a 12% fall in house prices at the beginning of the year by research groups like Capital Economics are now being challenged. Savills believes that the housing market has passed its “peak pain” phase, although cautioning against a false sense of security.
Cash buyers have remained resilient, but demand from mortgaged buyers, especially buy-to-let investors, has decreased, according to Savills. The agency predicts that Wales and the North East will experience the strongest price growth over the next five years.
Andrew Wishart of Capital Economics argues that the high cost of borrowing alone is insufficient to trigger a significant drop in house prices. Additionally, longer mortgage terms play a role in stabilizing the market. The tight labour market is another factor contributing to the prevention of forced sales. Lenient forbearance measures further help in maintaining overall price stability.
Despite some challenges, if house prices remain stable in November and December, the year-end house price inflation could reach 0%. However, house builder Persimmon warns of a “highly uncertain” property market in 2024, despite a slight increase in demand last month.
Find out more about what’s happening in the property market in our News column.
