The country’s real estate market will also see more people renting properties and rents will rise 18% in the next five years.
The latest figures are predicted in the five year residential forecast published today (Friday 09 November) by real estate provider Savills that is regarded as one of the most respected outlook reports.
Having fallen by an average of 2% this year, the firm forecasts that the average UK house price will rise by just 0.5% in 2013 and a further 1.5% in 2014, with growth totalling 11.5% over the next five years but that will equate to falls of around 3% after adjustment for inflation.
It also says that the prime central London market will see flat values next year, with growth resuming in 2014. Growth has totalled 53% since the bottom of the market in the first quarter of 2009 and increased tax may provide the catalyst for the expected slowdown.
Overall the five year growth will total 25.6% and the more domestic locations such as prime South West London will rely increasingly on the flow of international money.
The forecast suggests that it will be 2016 before the mainstream average sustains marginal inflation adjusted price rises and the North/South divide will be reinforced and the lower end of the market will continue to see very suppressed transaction volumes.
Over the next five years there will be further polarisation between those with and without equity. The firm estimates that the housing wealth of the under 35s, who hold just 4% of the UK’s housing equity, will fall 24%, to £62 billion.
By contrast, at the upper end of the market, sales of £1 million plus homes will increase by around three quarters, to exceed peak levels by 19% by 2017. As a result, the housing wealth of the over 55s will rise 16% to £1.65 trillion by 2017.
Renting will continue to trend upwards as more young singles and families are excluded from home ownership and rents will continue to rise ahead of inflation, rising 18% over the next five years, though affordability will constrain growth in some locations.
‘For real, inflation adjusted house price growth to extend beyond London and the top tiers of the market, we need a sustained and widespread improvement in household incomes fuelled by a stronger economic recovery than we have seen to date,’ said Lucian Cook, director of Savills residential research.
‘Over the last five years there have been wide geographical variations in the performance of the housing market, both in terms of price movements and transaction levels. We expect these distinctions to remain as we move to the next stage of recovery in the housing market cycle, when we expect to see a gradual pick up in transaction levels that have been the main casualty of the downturn,’ he explained.
