Savills is warning that the average UK house price is projected to fall by a further 3.0 per cent in 2024 - before inflation erodes values further
In a long term forecast the agency says values held up slightly better than expected in 2023, as mortgage markets settled over spring and autumn months.
Taking into account the current rate of falls, Savills has forecast that annual falls will stand at 4.0 per cent by the end of this year, which will leave values down a total of 7.0 per cent since the autumn of 2022 to the end of 2023.
Prime Central London is expected to see the least downward pressure on prices next year, given much less reliance on mortgage debt and the relative value on offer to a range of wealthy domestic and international buyers.
Prices remain 19 per cent below their 2014 peak in this rarefied sub-market, although the prospect of a general election is expected to push out the timing of a recovery.
Cash buyers have remained the most resilient buyer group over the past year, with activity 3.5 per cent higher than the 2017-19 average.
However, less activity among mortgaged buyers – most notably buy-to-let investors – means overall transactions are expected to end this year a whopping 20 per cent down on 2022.
Transactions are expected to remain at around 1m in 2024, rising to 1.16m in 2028 as mortgaged buyers gradually return to the market; slightly below a pre-pandemic norm of 1.2m.
Savills says it expects the Bank of England to start cutting rates in the second half of 2024, giving more capacity for price growth in the mainstream market from the end of next year.
Savills has forecast that house prices will grow by an average 17.9 per cent over the five years to 2028 taking the average house price to £300,108 by the end of the forecast period.
Lucian Cook, head of residential research at Savills, comments: “Interest rates are expected to have peaked and the worst of the house prices falls look to be behind us, but the first cut to rates still looks to be some way off.
“This means continued affordability pressures are likely to result in further modest house price falls over the first half of 2024, resulting in a peak to trough house price adjustment [fall] in the order of 10 per cent.
“The expectation of a gradual reduction in rates suggests a progressive restoration of buying power and steady recovery in demand. We expect growth to accelerate as affordability pressures ease, with the strongest growth forecast for 2027 when rates reach their long-term neutral level. From there we expect growth to settle at a rate broadly in line with income growth.”