Key Takeaways
• UK housing market set for recovery
• Savills forecasts 18% growth by 2028
• Price falls before recovery
• Rental market and prime housing to rebound
• Institutional landlords gaining importance
Savills’ Optimistic Forecast
The UK housing market, after facing a tumultuous period marked by uncertainty and decline, is now poised on the cusp of a remarkable recovery. According to the latest projections by Savills, a global real estate services provider, the market is expected to experience significant growth in the coming years. These projections suggest a nuanced but optimistic future for homeowners, investors, and industry stakeholders alike, painting a picture of resilience and eventual prosperity amidst ongoing economic challenges.
Savills’ five-year residential forecast, released in November 2023, predicts a total growth of 17.9% in mainstream house prices by 2028. This forecast follows a period of anticipated decline, with a moderate 3% drop expected in 2024. However, this downturn is seen as a precursor to a robust recovery, beginning as early as 2025. Savills anticipates a progressive increase in house prices starting with a 3.5% rise in 2025, escalating to 6.5% in 2027 before slightly tapering to 5% in 2028. This growth trajectory underscores a market that is not only recovering but also gaining momentum over the next five years.
Beyond the Pain Point: A Market Rebound
Britain’s housing market appears to have traversed its "peak pain" phase, with expectations of bottoming out by the next summer. The projections indicate a gradual but steady recovery, dispelling fears of a prolonged downturn. This expected rebound is attributed to a combination of factors including a reduction in interest rates, easing affordability pressures, and a restoration of buying power. As a result, the average house price is anticipated to be approximately £45,000 higher by 2028, signaling a significant recovery in market demand and buying power.
Moreover, the resilience of the property market, despite economic uncertainties and higher interest rates, suggests an underlying strength that could see it bounce back quicker than anticipated. Savills’ forecast points towards a future where the housing market not only recovers from its recent bruises but also emerges stronger, backed by a more stable and supportive economic environment.
Shifting Dynamics in the Rental and Prime Housing Sectors
The rental market and prime housing sectors are also expected to see notable changes in the coming years. Savills predicts that the challenges faced by individual private landlords will pave the way for institutional landlords and the Build to Rent sector to play an increasingly important role. This shift is anticipated to bring about a more structured and resilient rental market, with average UK rents ending 2023 up by 9.5% year on year - a figure that is lower than 2022 but higher than any other year on record.
Prime housing markets, encompassing the top 5-10% of the market by value, are projected to recover more quickly than the mainstream market in 2024. This segment’s lesser reliance on borrowing positions it for a faster rebound, with values expected to rise by almost a fifth by 2028. Prime central London, in particular, is poised to be a strong performer in 2024, with no anticipated price falls, although domestic political uncertainty and a higher tax environment may slow down its recovery.
Conclusion: A Market on the Mend
The UK housing market’s journey through economic turbulence to a forecasted period of growth and stability is a testament to its underlying resilience. Savills’ optimistic projections offer a beacon of hope for those concerned about the market’s direction. While challenges remain, the signs of recovery and growth on the horizon suggest a bright future for the UK housing landscape. For homeowners, investors, and industry stakeholders, these forecasts provide a valuable perspective on the market’s potential trajectory, informing decisions and strategies in the years to come.
In sum, the UK housing market appears to be on the brink of a significant recovery. With projected growth, a rebound in the rental and prime housing sectors, and the rising importance of institutional landlords, the next few years could see a reshaping of the market landscape. As the market navigates through the remaining challenges, the outlook remains cautiously optimistic, pointing towards a period of sustained growth and stability.
