Savills price forecast has been revised upwards in light of the measures announced in the recent budget and more positive expectations for the UK economy. Properties in the North, the North West and the Midlands are expected to see the greatest gains.
2021 will be a complex year, with competing forces having different impacts on the housing market over the course of the year. But government support, the easing of social distancing restrictions, and low interest rates underpin our forecast for 4.0% price growth
A few months ago, Savills were more cautious for the outlook for 2021, anticipating that property prices would remain flat over the year. Their rationale included the March closure of the stamp duty holiday and the reality of rising unemployment at the end of furlough in April.
With stamp duty now tapered until October and furlough extended, they now see more cause for optimism. The vaccine rollout and easing of restrictions, they say, is likely to spur economic growth, reduce unemployment and increase consumer confidence. All of these are likely contribute to increased house prices, albeit with some slowing down towards year end.
A major driver of price growth over the coming years is the expectation that interest rates will remain low for several more years. Having previously anticipated that Base Rate would increase to 2.25% by 2025, Oxford Economics now expect it to reach just 0.5%.
With mortgage repayments staying low by historical standards, the regions where there is the greatest headroom for price growth are those where affordability is highest, i.e. northern England and the Midlands.
Savills full report can be found here