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Savills: UK housing market past 'peak pain'

Savills: UK housing market past 'peak pain'

Savills, has announced its belief that the UK housing market has surpassed its "peak pain" phase, with property prices anticipated to stabilise by the summer of 2024.


According to Savills' five-year outlook, the average UK house price is expected to experience a 3% decline in 2024, following a 4% decrease this year. Despite initial projections, property values fared slightly better in 2023 as mortgage markets settled, resulting in a total decline of 7% since autumn of the previous year.


Savills forecasts that the Bank of England will commence interest rate cuts in the latter half of 2024, aiming to lower the base rate to 4.75% by year-end, down from the current 5.25%. This downward trend in rates is expected to continue, with rates projected to reach 1.75% by 2027.

Commenting on the figures, Lucian Cook, Savills’ head of residential research, said: "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 [fall] in the order of 10%."


Cook emphasised that "the expectation of a gradual reduction in rates suggests a progressive restoration of buying power and steady recovery in demand." He added, "We expect growth to accelerate as affordability pressures ease, with the strongest growth forecast for 2027 when rates reach their long-term neutral level."


Despite the housing market's late-stage positioning in a typical cycle, regional variations are expected, with London and the south-east likely to experience slightly greater price falls due to deposit and borrowing challenges. Conversely, Wales and the north-east are forecasted to witness the strongest overall price growth over the next five years.


In conclusion, while challenges such as affordability persist, Savills remains optimistic about the housing market's trajectory, signalling a gradual recovery and stabilisation in the coming years.

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