博鱼体育集团

Current economic and housing market data paints a mixed picture.

The government recorded a budget surplus in January, the FTSE100 exceeded 8,000 for the first time ever in February and the Purchasing Manager鈥檚 Index jumped unexpectedly in the same month.

Despite the positive news, some economists believe a recession is inevitable as interest rates climb towards 4.5%.

In the housing market, transactions and mortgage approvals have slumped due to the spike in borrowing costs that followed the mini-Budget, but activity has been stronger than expected since Christmas, as we explored here, and trading updates from housebuilders have turned more positive in 2023.

Against this inconsistent backdrop, we have updated our five-year UK housing market forecasts.

We still expect UK house prices to decline by around 10% over the next two years as the impact of higher mortgage rates takes its toll on affordability.

Indeed, the UK Nationwide house price index recorded its largest annual fall (-1.1%) in more than 10 years in February.

However, we expect any weakness to be shorter-lived and now forecast a 4% rise in 2025 compared to the 2% increase we predicted in October. Compared to our last forecast, when five-year fixed-rate mortgages were above 6%, some equivalent rates are now below 4%.

Should the solid start to the year continue into the spring, a shallower overall decline would become a more realistic possibility and we will review our forecasts again before the summer.

Current figures certainly suggest that market activity will remain robust. The number of new prospective buyers registering in the UK was 10% above the five-year average in February and the number of offers accepted was 42% higher.

However, exchanges were down by a quarter, highlighting the prolonged nature of the hangover following last September鈥檚 mini-Budget.

It鈥檚 also true that higher-value markets, where there is less reliance on mortgage debt, have fared comparatively better so far this year, as we explore here.

We still believe prime London markets will outperform the UK over the next several years due to the higher proportion of cash buyers, as well as the return of international travel, the currency discount and the fact average prices in prime central London are 15% down from the last peak in mid-2015.

The Lettings Market

In the prime London lettings market, supply looks like it may stay lower for longer, keeping upwards pressure on rental values.

The relative strength of the sales market means there could be fewer accidental landlords this year, which means supply could remain frustratingly tight in many areas.

鈥淏ased on the evidence of the last few weeks, it looks increasingly unlikely that the lettings market will return to any sense of normality this year,鈥� said David Mumby, head of prime central London lettings at 博鱼体育集团 Frank.

For now, our forecasts for prime London markets remain unchanged from October.

Across the UK, there is little sign of the supply/demand imbalance ending in the short-term, with affordability challenges in the sales market likely to underpin demand for rental properties.

At the end of last year, Rightmove reported a 38% reduction in the number of homes listed for rent compared to before the pandemic in 2019, while the RICS Market Survey continues to report a fall in landlord instructions and rising tenant demand.

We have revised up our forecasts for Greater London in 2024 (to 4% from 3%) and in 2025 (to 3.5% from 3%).

Meanwhile, the higher cost of buy-to-let mortgages, recent tax changes and the prospect of further legislative obligations may lead some individual private landlords to sell up, increasing upwards pressure on rents.

This, along with expectations for relatively robust wage growth over the next five years, support our strong outlook for rental growth.

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