Knight Frank has reversed its house price forecast for this year, and is now predicting a 3% increase.

Last year, the agency said there was likely to be a 4% drop in house prices in 2024 as interest rates were set to remain high.

But now that inflation is falling more quickly than expected, and the Bank of England comes under pressure to cut its base rate, there is cause for more optimism.

A raft of mortgage rate reductions since the turn of the year, also adds weight to the argument that the housing market may have turned a corner.

Falling faster

Knight Frank says: “The main reason for this changing outlook is that inflation is falling faster than expected. As a result, mortgage lenders have dropped their rates fairly significantly in recent weeks, partly to win business in a low-volume market.

“As a result of this more positive backdrop, we have revised our UK house price forecasts from three months ago,” it says.

We now expect UK mainstream prices to rise by 3% in 2024.”

“We now expect UK mainstream prices to rise by 3% in 2024, which compares to a decline of 4% predicted in October.

“How long the current momentum in the housing market continues depends to some extent on when the general election takes place,” Knight Frank says.

20% growth

In London, it says, prices are only set to grow 2% this year due to “affordability constraints in the capital”.

The international property consultancy is also making a forecast of 20.5% growth in prices over the next five years.