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Savills forecasts 20% rise in house prices by 2028

  • 07/05/2024
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Savills forecasts 20% rise in house prices by 2028
Savills forecasts house prices will rise by more than 20% over five years following positive signs of improved buyer demand and a stronger-than-expected year so far.

The estate agent revised up its 2024 forecast from -0.3% to 2.5% largely due to the fall in the cost of mortgage debt and a slight improvement in the outlook for economic growth. Its longer-term outlook has been boosted from growth of 17.9% to 21.6% by the end of 2028, with rises expected to be distributed evenly over the period.

Lucian Cook (pictured), head of residential research at Savills, said: “In November, a 75% loan-to-value [LTV] mortgage from Nationwide on a two-year fix cost 5.34% and mortgage approvals were down below 50,000 per month. The higher cost of debt dampened demand and put downward pressure on prices. However, the highly competitive nature of the mortgage market has meant that lenders have fairly aggressively priced in the prospect of cuts in bank base rate, causing buyer confidence, and prices, to recover somewhat.

“Today, while the bank base rate remains at 5.25%, the cost of the same Nationwide two-year fixed-rate mortgage now stands at 4.84%, while a five-year fix carries an interest rate of 4.5%.

“This has caused monthly mortgage approvals to rise above 60,000 in February and March, with annual house price growth standing at to 0.6% at the end of April.”


Mortgage affordability will continue to bite

Cook noted, however, that uncertainty in the Middle East and higher-than-expected US inflation have caused swap rates to continue to rise, which means UK borrowers are unlikely to see a further meaningful fall in mortgage rates this year.

An autumn election could impact sentiment towards the end of the year, though polling suggests that most buyers and sellers will have already factored in a change of government, which will minimise the impact, he added.

Without previously expected interest rate falls at the start of Savills’ forecast period, affordability constraints will become a factor in market activity towards the end of the five-year period, the agent added.

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