Savills upgrades price forecast after Budget boost

Savills has become the first forecaster to formally raise its projections for house price growth in the wake of last week’s Budget. The estate agent said it was increasing its  forecast from 0% this year to 4%, with growth fastest outside of London.

The forecasts follow the unexpectedly strong market performance last year, with prices up 7.3% in the wake of the spring coronavirus lockdown.

They come in the week after chancellor Rishi Sunak (pictured) extended the stamp duty holiday on properties under £500k  brought in last July until the end of June this year, with properties under £250k exempt until September. The chancellor also said the government will support mortgage lending at 95% loan to value by offering government guarantees on loans.

Sunak was criticised in some quarters for unnecessarily stoking up demand in an already overheated housing market, and thereby driving up prices. The Office for Budgetary Responsibility said the measures would probably prompt a “little” rise in prices.

Savills said prices will rise by just 2.5% in London this year, rising to 5% in the South-east, the South-west and East of England.

Prices will go up by 4.5% in the North-west, Yorkshire and the Humber, and the East and West Midlands. Scotland, Wales and the North-east should all see rises of between 3% and 3.5%, Savills said.

Prices across the UK will grow by a fifth by 2025, Savills said, with growth highest in the North-west and lowest in Yorkshire and the Humber.

The firm said the search for space and “lifestyle relocation” would drive strong demand in prime lifestyle and country house markets, alongside a resurgence in prime central London properties.

Lucian Cook, Savills head of residential research, said that 2021 was going to be a “complex and uneven year”, but that the decision to extend the stamp duty holiday and introduce mortgage guarantees “significantly reduced the downside risks” to prices.

He said: “The outlook has improved since the beginning of the year given the speed of the vaccination programme, the expected relaxation of social distancing measures and government support for both jobs and the housing market.

“By extending both the stamp duty holiday and the furlough scheme in last week’s Budget, the Chancellor has significantly reduced the downside risks in the mid-year, while a recovering economy should support price growth towards the year end.”