House prices in the UK are expected to rise by almost 15 per cent over the next five years, adding £32,000 to the price of the average home by 2023, according to a new property market forecast.
The average property will cost £248,000 by 2023, said Savills, the estate agent who carried out the research.
However, Londoners used to living life in the fast lane should get used to a slower pace with house price growth no longer driven by the capital’s property market, in a reversal of the trend seen over the past decade.Over the past 10 years since the financial crisis, house prices rose by 72 per cent in London. By comparison they rose just 1.9 per cent in the North and 5.8 per cent in Scotland.
However, forecasts from Savills research and Oxford Economics based on predicted wage growth, interest rate rises and transaction numbers, show the biggest house price rises are expected to be in the North West of England, where the main city of Manchester in particular continues to draw young professional buyers and investors.
Savills says prices are predicted to rise 21.6 per cent in the region between 2019 and 2023.
The Midlands – driven by the increasing popularity of Birmingham; Yorkshire and Humberside; Scotland and Wales all also have the capacity for mortgage borrowing to increase relative to incomes and so are expected to experience strong double-digit price growth.
Conversely, London, where the average house price is now £429,000, will see prices rise only 4.5 per cent in the next five years.
The estate agent pointed out that even though the average income of buyers in the capital is £76,000 (58 per cent more than the rest of the country), stricter mortgage lending limits introduced after the financial crisis means that they would still need a deposit of £123,000 to buy the average London home.
With buyers forking out such huge sums, it is no wonder that Brexit-related anxiety is most keenly felt in the capital, and likely to remain so for longest.
“Brexit angst is a major factor for market sentiment right now, particularly in London, but it’s the legacy of the global financial crisis – mortgage regulation in particular – combined with gradually rising interest rates that will really shape the market over the longer term,” said Lucian Cook, Savills head of residential research.
However, London’s prime market, comprising its most expensive properties, is expected to see a stronger upswing in the years to 2023, with 12.4 per cent price growth predicted for pricey central London properties.
Savills said this was because high-end buyers are more likely to be paying cash and so are unaffected by mortgage regulation. In recent years these buyers have been put off by increased property taxation at the top of the market and, more recently, by Brexit uncertainty.
However, the estate agent expects London to remain a popular place to live and work after Britain leaves the EU, and thus a well-regarded place to own high-end property.