Savills lifts 2021 house price growth forecast
By Michele Maatouk
Date: Tuesday 27 Jul 2021
(Sharecast News) - Savills lifted its 2021 house price forecast on Tuesday, citing the extension of the stamp duty holiday.
The property group now expects house prices to rise by 9%, up from a previous estimate of 4%, which was made before Chancellor Rishi Sunak extended the stamp duty holiday to the end of June. The forecast is based on the "incredibly strong" first half, which saw values rise by 5.6% on average, according to Nationwide.
Savills expects further growth of 3.5% next year. Between 2022 and 2025, prices are expected to rise between 11% and 12%, taking total growth to the end of 2025 to 21.5%, on a par with previous forecasts. However, Savills said the shape of growth over the next four years is more difficult to forecast given the "extraordinary conditions" of the past 18 months.
Savills said interest rates are critical to its forecasts. It is assuming a Bank of England base rate no higher than 0.5% by the end of 2025.
Lucian Cook, head of residential research at Savills, said: "Some of the growth generated by the extraordinary market conditions of 2020 and 2021 could unwind at times during 2022, but we see nothing on the horizon that would trigger a major house price correction.
"New buyer demand continues to outweigh supply despite the potential stamp duty saving falling from £15,000 at June 30 to just £2,500 until the end of September, and this against low levels of supply.
"This imbalance looks set to continue, underpinning further price growth over the near term, particularly as people look to lock into current low interest rates. But such strong growth in 2021 will leave less capacity for growth over the next few years, particularly as interest rates are expected to rise a little earlier than leading commentators had previously projected."
Cook added that a steeper-than-expected rise in interest rates would restrict growth, although it would have to be severe to lead to actual declines in values.
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