Savills Offer Lukewarm Prediction for UK Housing Market
Estate agency Savills has recently released a report in which it predicted that house prices across much of the UK will settle down in the next five years.
While prices in the East, South East and South West of the country will go up by around 20% by the end of 2020 (according to Savills figures), over most of the rest of the UK, growth will be closer to 10-15%. Interestingly, London 's price growth prediction for the five year period is only 15%, showing that much of the price growth we are seeing is effectively a ripple effect, with high prices spreading from London outward while in the Capital itself, despite prices being high in real terms, the growth index is not quite so sharp.
The property market in London, at least at the top, prime end, has been slowing of late, since the introduction of new Stamp Duty rules last year. The level of foreign investment in prime property has been falling, and while domestic purchases of high-end have been fairly steady, sellers have been put under increasing pressure to keep their prices as (relatively) low as possible. Indeed at the top end of properties in London, prices have gone down by over 4.5%, according to Savills.
However, despite the above, the ratio between house prices and average household earnings in London is high "thanks to growth seen over the past 10 years", according Lucian Cook, head of residential research at Savills.
Savills have predicted that the cost of the average house in the UK will go up by 5% next year but that that growth will fall steadily, reaching 2.5% by 2020, amounting to a total increase of 17% in the next five years, bringing the average price up to around £240,000.
This is somewhat at odds with the latest price growth figures released by Halifax this year. While Savills calculated annual growth at 4% for 2015, Halifax 's data showed that following an average price increase over October of 1.1%, annual growth to the same month reached 9.7%, more than two times Savills estimate.
However, when it comes to working out whose data to trust, Savills have experience on their side ñ their successful predictions of both the 2007 crash and the subsequent bounce back have afforded them a lot of authority when it comes to anticipating movements in the housing market.
Part of the reason behind Savills lukewarm prediction for the market this time around is the introduction of more and more affordability checks and stricter rules placed on those wanting to borrow, following the crash. This, combined with steadily increasing prices, will lead to a surge in renting and a drop in the number of homeowners in the UK, Savills believe.
"Öhigh house prices also create a barrier to new buyers" said Neal Hudson, one of Savills researchers. "Rather than creating a nation of homeownership," he went on, "it appears we have created a generation (or two) of homeowners."