Home Economy News British home prices to flatline this year, rise 3% in 2025: Reuters poll

British home prices to flatline this year, rise 3% in 2025: Reuters poll


British home prices to flatline this year, rise 3% in 2025: Reuters poll By Reuters

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Published Feb 29, 2024 02:40AM ET
Updated Feb 29, 2024 04:36AM ET

© Reuters. FILE PHOTO: A woman walks past houses on a leafy street in Islington, London, Britain, June 22, 2020. REUTERS/Simon Newman/File Photo

By Jonathan Cable

LONDON (Reuters) – British home prices will flatline this year, a better performance than expected three months ago, buoyed by supply constraints and expected interest rate cuts later in the year, a Reuters poll found.

After a slowdown, Britain’s property sector has picked up in recent months as mortgage interest rates have fallen although some lenders, including Santander (BME:SAN) and HSBC, have recently announced price increases.

Still, the Bank of England is expected to start cutting borrowing costs from a 16-year peak of 5.25% in the third quarter, probably in August, a separate Reuters poll showed.

Those interest rate cuts meant all 19 respondents to an extra question said purchasing affordability would improve over the coming year.

“With little change in house/flat prices, lower mortgage rates during the year and higher incomes will combine to improve affordability,” said Ray Boulger at mortgage adviser John Charcol.

Average home prices are expected to hold steady this year before rising 3.0% in 2025 and 4.0% in 2026, medians in the Feb. 16-28 poll of 26 property market experts showed.

Overall inflation is expected to average 2.5%, 2.1% and 2.0% in the three years, respectively.

“We expect house prices will recover in the second half of 2024 but may not show in the indices until 2025. More competitive rates will support modest growth in 2025 and 2026,” said Marcus Dixon at real estate services firm JLL.

Home sale prices rose in annual terms this month for the first time in six months as demand from buyers strengthened, property website Rightmove (OTC:RTMVY) said earlier in February.

In London – a big draw for foreign investors – prices will increase faster than nationally this year, rising 1.7%, and then increasing 3.0% next year and 4.3% in 2026, the poll found.

“The exodus from London has ended and new construction of residential units has plummeted. At the same time, the UK’s capital city remains a beacon for international homeowners,” said Tony Williams at advisory firm Building Value.

Housebuilder Taylor Wimpey (LON:TW) will build fewer houses this year, it said on Wednesday, joining other developers in cutting building targets, just days after Britain’s competition watchdog concluded the sector had limited supply to maintain its prices.

However, the supply of affordable homes will narrow modestly in the next 2-3 years, according to five analysts. Three said it would stay the same while five said it would widen.

“There’s a lot of quite good quality one- and two-bedroom urban living options coming through,” said Lee Layton at global property consultants Colliers.

“Obviously, a lot needs to be done and it will be years before we ever produce enough affordable housing for the need. But I hope that we will start heading in the right direction in the next 2-3 years.”

The average asking price of a UK property was 362,839 pounds ($458,882) this month, Rightmove said, around 11 times the average British salary. When also factoring in the downpayment needed to secure a mortgage, it puts the dream of home ownership out of reach for many.

When asked about the proportion of homeowners to renters, nine analysts thought it would decline. Six said it would rise.

“Tenants’ finances have been under increasing pressure, with rising rents and high inflation limiting their ability to put money aside for a deposit,” said Aneisha Beveridge at estate agency Hamptons.

(For other stories from the Reuters quarterly housing market polls:)

($1 = 0.7907 pounds)

British home prices to flatline this year, rise 3% in 2025: Reuters poll

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