Londonís house prices are set to grow at a slower rate over the next 5 years than those in any all other regions of the UK, in the clearest indication yet that the past 10 or so years of the capitalís soaring house price growth relative to the rest of the country is coming to an end.
The data in question is released by property group, Savills, who stated that properties in the Southeast of the country will increase by 26.4% over the 5 years, with London yielding house price growth of a mere 10.5% by 2019, lending further weight to the argument that there exists a migration of individuals, from the capital to its surrounding regions, fed up with Londonís over-inflated housing costs.
Other reasons for the slowdown in Londonís house price growth include falling demand resulting from buyers scepticism over a projected interest rate rise next year, uncertainty stemming from the prospective change of government and the impact of stricter lending regulations on mortgage activity as ëstress-testingí prevents would-be buyers attaining property purchases within the capital.
Nationwide UK price growth was forecasted at 19.3% for the 5 years to 2019, mainly aided by the performance of the South East, with Scotland notably expected to oversee 3.5% growth in 2015.
However, despite the market teeming with low interest, top-notch mortgage products from Britainís high lenders, the impression of Aprilís Mortgage Market Review and additional powers, in the shape of loan-value controls, afforded to the Bank of England loom large over would-be buyers restricting them from accessing these home loans.
ìWe expect wage rises, an improving economy and greater recycling of existing housing wealth between generations to support growth, while mortgage regulation is likely to prompt greater reliance on the bank of mum and dad with more equity released by downsizing,î said Savills UK head of residential research, Lucian Cook.
ìMortgage regulation will restrict peopleís ability to get on or move up the housing ladder, whatever the banks and building societies aspire to lend,î added Cook.
Expected impact of a Mansion Tax
A mansion tax which would accompany a change in government has been received with no small amount of unease by wealthier buyers, with houses over £2m to be slapped with an additional levy as a Labour government would seek to claim £1.2bn from the proceeds.
A mansion tax would have its most significant influence on properties in the heart of London, with Savills forecasting houses over £5m to fall by up to 10%. Given that intake from stamp duty is higher from properties within Chelsea and Westminster than the gross amount raked in from the entire North and the other Union countries, the profound impact this mansion tax would have on a slowing in Londonís house price growth cannot be disputed.
Yet, if no mansion tax was implemented, Savills forecasts Londonís most expensive houses to rise in price by 22.7%, instead of the 15.9% growth they would undergo if the mansion levy was imposed.
Sophie Chick, Savills senior research analyst, said: ìIt would take some time for the markets to accurately price in the impact of a mansion tax, but the threat of it has already slowed the market. If it becomes clear that a mansion tax is to be introduced after May 2015, we would expect an immediate price adjustment before the market more rationally finds its level.î
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