Cebr has released a new forecast, which anticipates that the Bank of England (BoE) will delay its planned base rate rises now that Russia has invaded Ukraine. The report expects this change will improve the near-term outlook for house prices, but adds that the longer-term prospects are now gloomier.

An expectation that further BoE rate hikes may be delayed as a result of the conflict in Ukraine, in addition to indications of robust activity in the first months of 2022, have led to an upward adjustment of Cebr’s nearer-term house price forecasts.

Douglas McWilliams, deputy chairman at Cebr, said: “Our forecasts now point to 3.6% annual growth in 2022 and an annual contraction by 0.6% in 2023. However, amid the possibility that the crisis will lead to higher-for-longer inflation that may require a more protracted period of monetary contraction, our longer-term forecasts have been downgraded. A return to house price growth, at just 2.0%, is now expected for 2024.”

Economic risks over the next 12 months
UK CPI inflation continued to rise in January, reaching 5.5%, the highest rate recorded since March 1992. Inflation is set to continue its upward trend in the coming months as sharp rises in global energy prices continue to feed through into the representative consumer’s ‘shopping basket’. Following the two recent Bank of England base rate rises, bringing the rate to 0.5%, mortgage rates have started to increase, a factor that is likely to cool housing demand in the months ahead.