Leading property experts, Savills, predict house prices could climb by 2.5% in 2024. This optimistic outlook follows the recent decision by the Bank of England to cut the base rate to 5% – the first reduction in four and a half years.
What does this mean for you?
This rate cut is a strong sign that the fight against inflation might be turning a corner. Savills believes this move will lead to more affordable mortgage rates, making it easier for people to buy homes and boosting demand in the property market.
Lucian Cook, head of residential research at Savills, explains: “As a result of the cut, mortgage rates will be on course to return to more affordable levels, gradually improving the range of buyers in the market and their buying power. We expect this to feed through into more market activity in the autumn, particularly if there are further cuts to the base rate in the coming months.”
Positive Signs for the UK Economy
This prediction comes on the heels of positive news for the UK economy. Figures show the economy grew by 0.6% between April and June this year – a promising sign of recovery from the recession at the end of last year.
Traders are now predicting a 39% chance of another base rate cut in September, with an even higher 82% chance of two reductions before the end of 2023.
Cautious Optimism
While the recent growth is encouraging, some experts urge caution. Simon Pittaway, a senior economist at the Resolution Foundation, warns that the UK’s long-term economic performance remains lackluster. He emphasises the need for increased productivity to drive real improvements in living standards.
Despite this, there’s a general consensus that the Bank of England might further reduce rates. Sanjay Raja, Deutsche Bank’s UK chief economist, points to the recent lower growth rate and weaker inflation data as factors supporting further cuts.
House Prices Already on the Rise
Data from Nationwide reveals UK house prices already inched up by 0.3% in July, reaching an average of £266,334. This represents an annual growth rate of 2.1%, surpassing inflation for the first time since September 2022.
Savills remains optimistic about the future of the UK property market. They project an impressive 21.6% surge in house prices over the next five years, concluding in 2028.