Why Yorkshire house prices could see the second largest rise in the UK over the next five years

At the beginning of November last year analysts predicted that house prices would fall by an average of three per cent in 2024 and that sales would remain at around 1m for the year and this was based on the cost of a 75 per cent loan to value mortgage on a two year fixed interest rate of 5.34 per cent and the fact mortgage approvals were down 50,000 per month while new buyer enquiries had diminished.

However, the average UK house price rose by 1.1 per cent in the first three months of this year, according to Nationwide, bringing average annual house price growth to 1.6 per cent at the end of March, while mortgage approvals in February rose above 60,000 for the first time since September 2022 and new buyer enquiries also grew.

Savills say the recovery has been underpinned by a slightly improved outlook for economic growth and an easing of mortgage rates due to lenders competing for business.

While the bank base rate remains at 5.25 per cent, the cost of a two-year fixed-rate Nationwide mortgage now stands at 4.84 per cent, while a five-year fix carries an interest rate of 4.50 per cent.

The team at Savills stresses that they are “not getting carried away” due to uncertainty around future base rate cuts, a relatively weak outlook for economic growth in 2024 along with the potential for a general election to pause the recovery but their expectation for house prices this year has gone from low single-digit house price falls to low single-digit increases.

The analysts are increasingly confident that house price growth will be in positive territory at the end of 2024 though they expect price increases this year to be 2.5 per cent at the most.

They add that there is little prospect of a further meaningful fall in mortgage rates this year, with a risk that instead they could rise a little.

Savills revised forecast for Yorkshire house prices is among the sunniest and starts with a predicted 3.5 per cent rise in 2024, a 4.5 per cent increase in 2025, a 5.5 per cent rise in 2026, a 6.5 per cent jump in 2027 slipping to 5.5 per cent in 2028.

This adds up to a 28.2 per cent overall uplift over the five year period, which, if it comes to pass, would make it the second highest performing region in the UK with the North West on top with a predicted 28.8 per cent growth.

London has the lowest predicted five year rise with 14.2 per cent.

Closer to home, buying agent The Property Partnership Group has analysed Land Registry data that records transaction levels across North Yorkshire and the firm is predicting a recovery in home sales volumes over the next quarter.

Director Tom Robinson says: “In November last year sales levels were at a similar low to both the 2008/9 credit crisis and the Covid 19 pandemic. Inflationary pressures and a reaction to the Autumn Statement in 2022 saw interest rates rise to their current levels of 5.25 per cent and the economic volatility and uncertainty since the Autumn saw month-on-month home sales fall by an astonishing 62 per cent.”

Fellow director, Toby Milbank, adds: “Sales volume trends here have experienced many periods of volatility but the market has always demonstrated resilience and there is potential for a strong recovery in 2024.

“We called the bottom of the market in January this year and have seen a sharp rise in the availability of homes that sell off market with our clients taking full advantage of sellers readying themselves for improving market conditions.

“As we move through 2024, it will be interesting to see how recovery unfolds. Key drivers on the speed of the recovery will be the timing of the possible interest rate reductions and selling agents managing pricing expectations.”

Over at the Royal Institute of Chartered Surveyors, the latest residential survey shows that its members are optimistic about a stronger trend in sales activity over the next twelve months.

As for lettings, the latest feedback from RICS members on the rental market suggests that tenant demand continues to lose some momentum while landlord instructions remain in short supply and this is reflected in a more modest pace of rental growth.

This is expected to result in rents rising but not shooting up. As for the impact of a General Election on the sales and lettings markets, Simon Rubinsohn, Chief Economist, RICS, says: “There is still a strong perception that activity in the market will pick up in the latter part of the year and into 2025, irrespective of any political uncertainty around the general election.”