Going Up! House price forecast for 2021 revised upwards by agency

Another leading research team in a major agency has revised upwards its forecast for the 2021 market.

Savills revised its predictions recently and now it’s the turn of Knight Frank.

Referring to the mainstream market, Knight Frank research head Tom Bill says: “We expect UK house prices to increase by five per cent in 2021, rising from a forecast of zero at the start of this year. The strength of key market indicators in the first two months of the year meant that an upwards revision was likely even without the measures announced in the Budget.

“Our forecast for Greater London has risen to four per cent from one per cent in January. We now expect price growth in the UK to outperform the capital as the impact of the tapered stamp duty holiday extension drives demand in lower-value markets more consistently through to the end of September.”

With reference to Prime Outer London and Prime Regional markets, Bill says the firm’s original forecasts remain unchanged.

“However, continued uncertainty around the relaxation of international travel restrictions means we have revised our 2021 forecast for prime central London down to two per cent from three per cent” says Bill.

He notes that average prices in PCL have been flat over the last six months as international demand has fallen. By contrast, prices have risen by 1.3 per cent in prime outer London and four per cent in Greater London.

Bill suggests that overseas buyers may factor the upcoming two per cent stamp duty surcharge - starting next month - into price negotiations. This may lead to a short-term hiatus in activity during a period of price discovery, he adds.

The agency also believes that demand from international buyers may initially be more skewed towards properties with outdoor space than it was before the pandemic. This could make any recovery in prime central London prices more inconsistent across different property types.

Bill continues: “Meanwhile, we have revised our forecast for PCL in 2022 to seven per cent from six per cent as more of the pent-up demand currently building is displaced into next year.”