According to their research, London property prices are expected to decline by 10% in the first half of 2024 but will subsequently enter a period of growth.

By 2027, strong growth in property prices is expected, and by 2028, the average property value in London is projected to increase by £70,376.

This optimistic forecast is primarily based on the Bank of England's expectation to start lowering benchmark interest rates in the second half of 2024.

This move is expected to stimulate suppressed demand and drive stronger economic growth, subsequently pushing property prices higher. Lucian Cook, Director of Residential Research at Savills, stated, "Rates are expected to have peaked."

Cook noted that while the worst of the property price decline seems to be over, there is still some way to go before the first interest rate cut. He predicts 2027 to be the period of strongest growth in property prices, with the average property value in London expected to increase by £70,376 by 2028.

Although London's property price growth rate is relatively lower at 13.9%, this is because, as prices rise, buyers in London require more deposits and must borrow more funds relative to their income.

Continuous increases in mortgage interest rates have significantly impacted affordability in the capital, but population pressure and rising rents mean that demand will quickly rebound once interest rates start to fall.

However, the Bank of England's interest rate policy remains an uncertainty. According to Savills' forecast, the base rate will reach 4.75% by the end of 2024, then decrease by one percentage point each year, reaching 1.75% by 2027.

Cook explained, "The expectation of a gradual reduction in interest rates indicates a gradual recovery in purchasing power and steady demand recovery." He added, "We expect that as affordability pressures ease, economic growth will accelerate, and we anticipate the strongest growth when rates reach long-term neutral levels in 2027, from which point we expect growth rates to be broadly in line with income growth."

Additionally, the forecast also analyzed the regional distribution of London property prices, showing varying trends in different areas. Apart from London, the Northeast and Wales are expected to see the strongest growth in property prices, at 21.4%.

However, it's worth noting that London is expected to lead price growth again by the end of this century, which could have an impact on regional markets.

Different regional markets respond differently to rising debt costs, but it is expected that these markets will gradually recover over time.