Agency forecasts no more house price falls in London

Cluttons, a prime London residential property specialist, has flagged an end to house price falls in its new forecasts for 2024 and 2025.  

While the property consultancy highlights risks to the central forecasts around the economic and geopolitical landscape, it expects home values to start to gain momentum as interest rate cuts come into view this year, with a one per cent rise in average UK prices followed by four per cent growth next year. 

Prime London pricing will be flat this year followed by 3.5 per cent growth next year. 

This is a more upbeat forecast than would have been anticipated even five months ago, and is informed by the increased positivity around the housing market that emerged when the Bank of England called a halt to interest rate rises from late summer 2023. Since then, lenders have been cutting mortgage rates. 

Even though millions of homeowners are still remortgaging onto new, more expensive, fixed-rate mortgage deals, lenders are offering a range of options to ensure people can stay in their homes. Many borrowers will have also been through exhaustive stress-testing on their finances before being granted a loan. This means the move to quick or forced sales in the wake of a sharp rise in interest rates has been avoided, which can lead to rapid house price declines. 

However, while prices have not been affected as much as may have been anticipated, activity levels in the market fell in 2023. The number of sales across the UK will rise in 2024, to just under 1.1m, around the 10-year average.  

As examined in its full forecast, Cluttons also expects a continuation of buoyant activity in the central London rental market, where demand is still outstripping supply. But it expects that the rate of rental increases will slow to 2.5 per cent this year, down from double-digit growth in late 2022. 

Gráinne Gilmore, director of research and insight at Cluttons, says: “The economic and political landscape includes much uncertainty as we move into 2024, both globally and domestically.

“A UK General Election at some point this year will create uncertainty in the months leading up to the vote. Yet it also provides an impetus for policymakers to implement or promise policy changes that could help more first-time buyers onto the ladder, to streamline property taxes and to overhaul the planning system to help get more homes built, all of which could provide a fillip to the market.  

“However, any intensification of the crisis in the Red Sea could contribute to rising inflation as the cost of delivering goods increases, which would, in turn, affect sentiment if the Bank of England can’t cut rates as quickly as expected. Likewise, any sudden rise in unemployment would act as a brake on the housing market.”

“The one certainty is that the era of ultra-low base rates that the country experienced in the 12 years to 2022 is over. The base rate is forecast to still be around three per cent at the end of next year.”

Cluttons is a Prime Central London residential adviser and agency with sales and lettings teams based in Chelsea, The City, Hyde Park, Islington, Tower Bridge and the South Bank, and Wapping and Limehouse.