Capital Economics now expects prices to grow by 3% this year, after previously forecasting a 1.5% decline.
Pantheon Macroeconomics also forecast that home prices will rise by 5% between April and December this year.
The faster-than-expected decline in inflation means analysts expect early interest rate cuts from the Bank of England.
This optimism fueled a mortgage price war as lenders jumped on the prospect of lower borrowing costs.
This has already pushed average mortgage interest rates to their lowest level in six months, with Capital Economics forecasting that two-year fixed rates will average 4.6% over the next six months before falling to 3.8. % by the end of the year.
This in turn will enhance affordability as buyers will see their savings expand further.
In October, the typical two-person household had to commit 28 percent of its combined disposable income to monthly mortgage payments, well above the average of 20 percent during the 2000s. According to Pantheon.
However, she said this will soon drop to 25% as prices fall, paving the way for more people to move into their homes.
Buyer demand in the first week of January rose 10% year over year, according to real estate website Zoopla.
Capital Economics revised its forecast for mortgage approvals this year from 600,000 to 740,000.
“It increasingly looks like 2024 will be a smart time to buy, provided you can find the deposit and get competitive mortgage finance,” says Lucian Cook, director of residential research at Savills.
The improved outlook could provide a boost to Rishi Sunak in his battle against Labour’s Sir Keir Starmer.
“Rising prices and improving activity on the back of lower mortgage rates should be a positive for the government,” says Andrew Wishart, who runs the housing service at Capital Economics.
The timing is key to the Prime Minister’s plan to hold general elections in the fall instead of the spring, as families will feel better as the year goes on.