A prominent agency has revised its market forecast for the rest of 2022 and says prices will rise more and for longer than expected.
Knight Frank is now predicting that price growth will end the year in high- rather than mid-single digits.
With inflation at a 40-year high and interest rates at their steepest in 13 years, annual house price growth rose to 12.4 per cent in April, data from the Office of National Statistics showed last week - with Nationwide and Halifax both reporting double-digit growth in May.
In its latest quarterly analysis, Knight Frank highlights that the housing market is taking longer than anticipated to recover from the distortions caused by the pandemic and stamp duty holiday.
It has therefore revised up its UK house price forecast to 8.0 per cent from 5.0 per cent for 2022 as a whole.
In prime outer London the agency has moved its prediction for price growth one percent to 5.0 per cent from 4.0 per cent and its prime country forecast to 7.0 per cent from 5.5 per cent.
It’s also increased its forecast for prime central London to 4.0 per cent from 3.5 per cent as the market is boosted by strong domestic demand as international buyers make a gradual return to the capital.
The agency says it’s upward revisions are underpinned by low levels of supply which have largely failed to keep pace with demand for 18 months now, particularly during the frenetic conditions of the stamp duty holiday.
However, Knight Frank says listings have picked up in recent weeks following the Bank of England’s decision to raise the base rate to 1.25 per cent and issued a series of stark economic warnings. More sellers have come forward in the belief house prices may be peaking.
Tom Bill, head of UK residential research at Knight Frank, says: “We still believe annual growth will return to single digits by the end of the year as supply builds and demand is put under pressure by rising mortgage rates and spiking inflation.
“House price growth is peaking as supply rebuilds and mortgage rates normalise.
“But one lesson from the pandemic is that nothing reverts to normal overnight, which is particularly true in a relatively slow-moving market like residential property. We therefore expect a more gradual return to earth for prices.”
Want to comment on this story? If so...if any post is considered to victimise, harass, degrade or intimidate an individual or group of individuals on any basis, then the post may be deleted and the individual immediately banned from posting in future.