Prospective buyers will be disappointed by an updated house price forecast from Savills, which suggests that house prices are set to rise by 9% this year – up from its March forecast of 4%.
A combination of factors is thought to be behind the upward revision, including the Stamp Duty holiday extension, historically low mortgage rates, and huge buyer demand as successive lockdowns have increased people’s desire for larger homes with more outdoor space. However, the estate agent has not revised its five-year cumulative growth forecast, with price inflation expected to ease as restrictions and fiscal incentives come to an end. Even so, it did admit that accurate predictions for the future remain tricky as uncertainty continues.
Demand remains high
Buyer demand is still far outstripping housing supply, with this imbalance a key contributor to the significant house price growth we have seen over the past year. This is in spite of changes to the Stamp Duty holiday since 1 July 2021, which have seen the potential tax savings buyers can make plunge from £15,000 to just £2,500. The holiday is due to end completely on 31 September 2021, with the nil-rate threshold returning to its pre-July 2020 figure of £125,000.
It is also thought that current house price growth is being driven by buyers eager to lock into low-interest, fixed-rate mortgages whilst the Bank of England base rate remains at its record low of 0.10%.
And the future?
Although current price inflation is almost certainly unsustainable, those waiting for a sudden house price crash are likely to be disappointed. Savills suggests that current evidence points to a “a soft landing” from 2022 onwards, “rather than a dramatic correction in values in the short term.” Whilst this year’s surge in house prices will leave less capacity for growth post-2021, says the estate agent, a number of factors have combined to prevent a more sustained fall in values.
- The fast pace of economic recovery has prevented a larger rise in unemployment;
- Growth has largely been driven by equity-rich home movers and higher earners, with less reliance on mortgage debt and the continued ability to meet mortgage affordability requirements;
- Interest rates are expected to rise slowly and modestly, which will have only a gradual impact on affordability.
Looking to buy?
In a busy and unpredictable market, expert support is the best way of ensuring you get through your property transaction as smoothly as possible. With so many buyers chasing so few properties, practices such as gazumping are unfortunately rife, while large chains can significantly slow the process or cause it to collapse altogether. In these situations, proactive and experienced conveyancing solicitors are vital to keeping your transaction moving through to completion.
For further information about how we can assist you, please get in touch with a member of our Residential Property team or obtain a quote online. Alternatively you can call a member of the team on 0344 967 2505 who would be happy to provide a quote and talk you through the process.