UK House Prices Forecasted to Increase by Nearly 20% by 2028 Despite Predicted Short Term Drop

Market stability attributed to high wage growth, decreasing mortgage rates, and cash purchases, while government schemes for first-time buyers are increasing demand and reducing supply, contributing to steep price hike predictions.

• UK house prices are forecasted to rise by nearly 20% by 2028, despite a predicted short-term fall, with the average house price expected to reach £300,108. These predictions come from property advisor Savills, who cite high wage growth, decreasing mortgage rates, and an influx of cash buyers as key contributing factors.
• Government schemes to support first-time property buyers, such as reduced deposits and stamp duty discounts, have increased demand and consequently reduced the supply of homes suitable for first-time buyers. This has inadvertently caused property prices to increase and created a bottleneck at the lower end of the housing market.
• The resilience of the property market, despite previous predictions of a crash, is largely due to the fact that many homeowners either own their buildings outright or have a large equity cushion on their investment, making them less likely to need to sell. Additionally, the increase in interest rates between 2020 and 2023 has not resulted in a significant increase in mortgage arrears due to a majority of mortgages being fixed.
• Despite the fact that the population has increased by 6 million since the first quarter of 2008, there has been a reduction in the number of mortgages due to high interest rates being a deterrent to potential homeowners. However, government initiatives have encouraged a slow return of mortgage buyers to the market.
• Despite these prevailing factors, the supply of UK housing has not grown proportionately to meet demand. This is partlially due to a majority of new homes built being unsuitable for first-time buyers and the government's housing targets not being sufficient to substantially increase the housing stock.

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