Economy

Now a forecast says London house prices won't rise until 2020

Now a forecast says London house prices won't rise until 2020”

House prices over the next five years are forecast to rise at half the rate of the past five years, according to Savills' Residential Property Forecasts.

Savills, the upmarket estate agent, is predicting that average house prices in the capital will fall 1.5% this year and 2% in 2018, and be flat in 2019, before returning to growth.

In total, house prices in the capital will rise 7.1 per cent in the years to 2022, the forecast by Savills showed - a marked decline from the 70 per cent growth seen over the past decade.

As London and the south-east continue to suffer anaemic growth, Savills stated the focus will shift to growing markets in the north of England.

In Scotland the forecast is for a rise of 2.5% this year, falling to 1.5% in 2018, rising to 3.5% in 2019, 5% in 2020 and then 3% in 2021 and 2022, a cumulative rise of 17.6%, more than the United Kingdom average of 14.2%. Towards the end of the five-year period, it forecasts that interest rate increases will cause the market to cool again.

"There is capacity for growth once we have greater clarity, but this will be constrained by rate rises and the corresponding ability to get mortgage debt, particularly in London and other higher-value locations".

This reverses the trend stretching back at least to the 1980s for house prices in London to grow at a faster rate than the rest of the UK.

Beyond the home counties, affordability is far less stretched, with house prices rising more in line with incomes. In the north-west, the average house price is 5.6 times average earnings. Coupled with a robust economic outlook and strong employment growth centred on Manchester will underpin the region's housing market, according to the report.

With first time-buyer deposits now 3.9 times the United Kingdom average, at £99,753, the city's mainstream market is particularly stretched - although the capital's prime central market is set for robust growth of 20.3 per cent.

And although the Bank of England is only expected to raise interest rates by 0.25 percentage points at its meeting today, Cook suggested any rate rise is expected to impact on transaction levels.

Low mortgage rates, solid job growth and the lack of homes on the market have to some extent countered the squeeze on household incomes from rising inflation and stagnating wages, the Nationwide building society reported this week.

First-time buyers will remain heavily reliant on the Bank of Mum and Dad or government initiatives such as Help to Buy as people move up the housing ladder less frequently.

Pummelled by a wave of tax and regulatory changes, the number of buy-to-let investors is set for a dramatic 27 per cent drop from 75,000 to 55,000 over the next five years. Those entering the market will be looking very carefully at yields and that will put the spotlight on urban markets outside the capital, ' said Cook.



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