Knight Frank has revised its house price forecasts upwards due to continually low levels of residential stock on the market.
The agent said listings are rebuilding more gradually than anticipated, which has resulted in Knight Frank predicting that price growth will end the year in high- rather than mid-single digits.
Nationwide and Halifax house price indices have reported double digit price growth in recent months, albeit at a slowing pace.
Now, Knight Frank’s latest quarterly analysis of house price growth highlights that the 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% from 5% in 2022.
The firm has moved its prediction for price growth in prime outer London to 5% from 4% and its prime country forecast to 7% from 5.5% in 2022.
Furthermore, it has increased its forecast for prime central London (PCL) to 4% from 3.5% as the market continues to be buoyed by strong domestic demand as international buyers make their gradual return to the capital.
Tom Bill, head of UK residential research at Knight Frank, said: “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.
“The distortive effect of low supply has also kept rental value growth high. A sharper slowdown in the sales market would have boosted supply and increased downwards pressure on rents as owners let out property that failed to sell for the asking price."