House Prices Seen Rising 4% in 2024/2025 at Pantheon Macroeconomics

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Economists at Pantheon Macroeconomics estimate house prices will see a firm appreciation in both 2024 and 2025 as confidence returns to the market, but elevated mortgage costs will stop runaway gains.

New analysis from then independent research house shows UK house prices were trending up at a 0.4% month-to-month rate in February, having been falling -0.1% m/m just six months ago.

"We expect house prices to rise 4% in 2024 and 2025, as mortgage rates continue ticking down and households’ disposable income grows firmly," says Robert Wood, Chief UK Economist at Pantheon Macroeconomics.

Image courtesy of Pantheon Macroeconomics.

This forecast for steady house price gains follows upbeat RICS housing market surveys - which Woods explains are a leading indicator for the market - that show demand and supply in the housing market continue to improve.

Indeed, the RICS balance for new buyer enquiries held at +6 in February, a two-year high. Pantheon's research says this outturn means house-purchase mortgage approvals will rise by around 25% year-over-year in the next few months.

"The rising supply of properties for sale is also greasing the wheels. Those households that put off moving due to high mortgage rates are taking the plunge," says Woods.

February's Nationwide house price index - a key gauge for the market - earlier this month showed UK housing prices were up 0.7% month-on-month in February, representing a 1.2% year-on-year increase compared with February 2022. This was the first annual rise in more than a year.

Rightmove, the property website, meanwhile reports that stocks of unsold properties on estate agents' books have risen to their highest since early 2021.

"Stocks are still at historically low levels, meaning no oversupply of homes that would crimp prices. Rather, the modest improvement in availability should boost buyers’ confidence that they can find a place to move to," says Woods.

However, house price growth will be capped by the cost of mortgages, with Pantheon Macroeconomics calculating that the rate on a 75%-LTV two-year fixed-rate mortgage will drop to 4.54% in December from 4.77% in February.