The UK housing market has performed more strongly than many anticipated so far this year, with average values increasing by 1.1%.
The outlook for 2024 has improved since our last November forecasts, primarily thanks to falls in the cost of mortgage debt. We now expect UK house prices to rise by 2.5% this year.
Improving economic performance, combined with steady cuts to the base rate, will open up more capacity for growth from 2025.
The average UK house price rose by a net figure of +1.1% in the first three months of the year, according to Nationwide. This brought annual house price growth to 1.6% at the end of March.
In addition, monthly mortgage approvals in February rose above 60,000 for the first time since September 2022, and the RICS reading for new buyer enquiries moved back into positive territory.
This recovery has primarily been underpinned by an easing of mortgage rates. A highly competitive mortgage market meant lenders have fairly aggressively priced in the prospect of cuts in bank base rates. As a result, while the bank base rate remains at 5.25%, the cost of the same two-year fixed-rate Nationwide mortgage now stands at 4.84%, while a five-year fix carries an interest rate of 4.50%.
In summary the five-year UK forecast has therefore been nudged up from 17.9% to 21.6%. The distribution of growth is also now expected to be slightly more even over the five-year period. A strong economic performance in 2025 and 2026 will support buyer sentiment. So, those fearing a total housing market meltdown can relax a bit as the UK housing market still promises profitability for prudent investors.
Sources:
Savills - https://www.savills.co.uk/research_articles/229130/359399-0
Assests for life - https://assetsforlife.co.uk/uk-house-price-predictions-for-the-next-5-years/
Baroncabot - https://baroncabot.com/blog/house-price-predictions