International property firm, Savills, has released it’s latest forecast on the residential property market in the UK, with its major findings being: Rents will rise by an estimated 13.7 per cent during the next five years, with London experiencing an expected rise of over 15.9 per cent. Transactions will stabilise, with the number of cash and first time buyers remaining strong. London’s market will perform strongly, with central London house prices expected to rise by over 12.4 per cent. UK house prices are expected to increase by 14.8 per cent in the years between 2019 and 2023. There will be significant variation in prices regionally, with the North West experiencing a 21.6 per cent growth, London likely to have a 4.5 per cent growth, and the East and South East of England expecting a rise of 9.3 per cent.
House prices in the UK are expected to rise, matching incomes during the next five years, as predicted by Savills in their study. According to the report, the current North-South divide will reverse, with Scotland, the North and the Midlands predicted to see the largest increases, with an average rise of 21.6 per cent for property in the North West. On average, the UK housing market will see a rise of 14.8 per cent in price, with affordability constraints affecting the market in the South and in London. Brexit will also have a significant impact on attitudes to property within London and the commuter belt, especially in the short-term.
Transactions in house buying have fallen from around 1.619 million in 2007, to approximately 1.145 million in 2018. However, forecasts predict that the market will remain stable during the next five years, despite a change to the market. Mortgage regulation and the global financial crisis, along with steadily increasing interest rates, has considerably shaped the housing market in the long term. Sales have only fallen by 6.9 per cent in the two years since the Brexit vote, which demonstrates how resilient the housing market is, with the figure forecasted to decrease by 1.0 per cent during the next five years. However, a continued re-balancing is expected, which could add pressure to the rental market, especially in London, where investors will look to increase yields.
Rental growth is estimated to follow house price growth, with an average rate of 13.7 per cent during the next five years. The tightening of access to mortgages, as well as a limited supply of social housing, is increasing the demand for PRS property at all price levels. This is especially true in the city, where rent prices are expected to rise by over 15 per cent. As demand outstrips supply, rent prices will rise, with investors focusing on high yielding markets. This will put increased pressure on rent prices in already expensive rental locations.
Key regional economies and cities, such as Birmingham and Manchester, will be likely to outperform other regions as they attract both investors and local buyers. Across the UK, the numbers of buy to let investors will continue to feel pressure as changes in mortgage interest tax relief and stamp duty has caused those with high leverage to pay down debt or rationalise their portfolios.
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