Savills upgrades 2021 price forecast to 9%

Property group, Savills, has upgraded its house price forecast for 2021 and now expects UK house prices to grow 9% for the year, revised from its previous 4% which was forecast in March. Before this, it had envisaged 0% growth for 2021.

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Property Reporter
29th July 2021
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However, Savills said that the next few years will be "harder to predict".

The group said the latest upwards change reflected the effects of the government’s extension to the stamp duty holiday and the impact of repeated lockdowns on what homebuyers want from their homes.

According to their forecast, in 2022 house price growth will reach 3.5%. And during the 2022-2025 period it forecasts a rise of between 11% and 12% in values, bringing total growth to the end of 2025 to 21.5%. This mirrors its previous forecasts.

However, according to Savills, given the extraordinary conditions of the past 18 months, the nature of growth over the next four years would be trickier to accurately predict. Interest rate rises were critical to the forecasts, with Savills’ projections assuming a Bank of England base rate “no higher” than 0.5% by the end of 2025.

Lucian Cook, Savills’ head of residential research, suggested that some of the growth driven by the unique market conditions could “unwind at times” next year. He adds: “But we see nothing on the horizon that would trigger a major house price correction”.

Savills say that conditions since the market reopened last year - including more affluent buyers entering the market and economic recovery reducing unemployment levels – as well as the predicted “slow and modest” rise in interest rates gradually squeezing affordability – underpinned its five-year forecasts.

However, these factors also suggest limited scope for further price rises at the end of 2025. This would not dramatically change the profile of buyers and the number of potential transactions, Savills stated.

Cook said: “New buyer demand continues to outweigh supply despite the potential stamp duty saving falling from £15,000 at June 30 to just £2,500 until the end of September, and this against low levels of supply.

“Such strong growth in 2021 will leave less capacity for growth over the next few years, particularly as interest rates are expected to rise a little earlier than leading commentators had previously projected.”

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