This amendment was made due to Oxford Economics’ forecast that there would be a longer lockdown and slower recovery, with economic output returning to pre-Covid levels by mid-2023.
Despite this, Savills expects mortgage affordability to be better by 2024 than what it predicted it would be in November due to interest rates remaining low.
The real estate firm said the Bank of England base rate would remain at 0.1 per cent until the second quarter of 2022 Q2 before rising gradually.
GDP is expected to fall 8.3 per cent over the year overall, Savills said, with rebounds of 6.3 per cent and 4.7 per cent in the third and fourth quarter.
Savills said lenders would be “bruised” by mortgage payment holidays and “more cautious” in the short-term but predicted the appetite to lend would return once the economy began to recover and unemployment fell.
The firm also amended its predictions for average house prices over the year, saying it now expected them to drop 7.5 per cent.
This new outlook is a middle ground expectation from the five to ten per cent decline in house prices the firm predicted in March and lower than the one per cent growth it forecast in November.
Savills originally said completed transactions will remain low at 25 per cent of the five-year average over the second quarter of 2020 with 700,000 transactions. However, due to the reopening of the housing market in England it believes activity will recover gradually over the second half of the year.
It also predicted transactions to return to normal levels by the third quarter of next year reaching one million transactions, followed by a higher amount of transactions in 2022 of 1.3m and above as the industry works to get through accumulated pent up demand.
Regionally, it predicted that house price movement will be “uniform” across the UK over the year with London and the South East leading the market’s recovery, instead of the expected strong growth in Midlands, North, Wales and Scotland.
Savills said: “When we launched our residential market forecasts in November 2019, the greatest uncertainties facing us were an impending General Election in December and the UK’s departure from the EU in January. The first case of coronavirus would not be confirmed for another month.
“The way we live and work has changed dramatically in the past few months, so too the lead economic and employment indicators.”