UK house prices will end the year 9.5% higher than they started it, but the strength of increases this year means that in London the market could flatline in 2016, property firm Savills said on Tuesday, as it revised its forecasts for the next five years.
The firm had predicted a 6.5% increase in prices across the country in 2014, but said that growth had “exceeded all expectations”. As a result it has revised up its forecast for the current year, and its prediction of total growth by the end of 2018 to 25.7% from 25.2%. Its five-year forecast assumes mortgage rates will have risen to an average of 5% by 2018.
In London, where the major house price indices all showed annual growth of around 20% at the start of the summer, Savills said it expected the rate over the year to hit 15%, far in excess of the 8.5% it had originally forecast.
However it said strong growth this year has left less capacity for further mid-term growth in some markets. Despite this year’s strong performance, it has left the five-year forecast for London unchanged, at 24.4%, and revised down that for and the wider south-east from 31.9% to 31.6%.
In London, Savills said it now expected prices to grow by 5% in 2015, down from a forecast of 6%, and to remain flat throughout 2016, rather than recording a 4% increase as it originally predicted.
The firm said over the five years to the end of 2018 it still expected prices to rise more quickly in the south-east and east of England than in the capital “as evidence mounts of the flow of buyers and equity out from the capital”. It added: “The midlands and the north have the potential to outperform thereafter, as has been seen in previous cycles.”
Savills UK head of residential research, Lucian Cook, said house prices had been underpinned by record low interest rates, rising loan-to-income lending and pent up demand from buyers re-entering the market as the economy and consumer sentiment have improved.
However, he added: “These extraordinary rates of house price growth cannot continue in the current, more regulated mortgage environment, particularly in the face of likely interest rate rises.”
Read more at: http://www.theguardian.com/money/2014/aug/26/uk-house-prices-rises-twice-predicted