Property price growth in UK set to be muted in 2018 but pick up over next five years
Property prices are expected to grow across the UK by 1% in 2018 and 14.2% cumulatively between 2018 and 2022, according to new research.
In London, however, prices are forecast to dip this year and nationally rental growth is expected to be 14% between 2018 and 2022, the latest residential forecast from real estate firm Knight Frank says.
It points out that house price growth has slowed from a peak reached three years ago, although the annual rate of change remains in positive territory.
A breakdown of the forecast figures shows that in London prices are expected to fall by 0.5% this year but pick up to a cumulative growth of 13.1% by 2022, while prices in the South East are set to be flat this year but grow by 14.2% over the five year period.
The biggest five year growth is projected for the North West at 16.4%, followed by the East of England at 15.9%, and the North East and the West Midlands at 14.8%. The South West and the East Midland are also forecast to see growth of over 14%, both at 14.2%.
The smallest price growth over five years is forecast for Scotland at 12%, with Yorkshire and Humber’s growth predicted at 12.6% and Wales likely to see growth of 13.1%.
In the lettings market rents are forecast to rise by 2.5% in 2018 across the UK, then by the same amount in 2019 and 2020, rising to 3% in 2021 and 2222, giving a five year forecast of 14%. In London the forecast is marginally lower at 1.5% this year and 13% over five years.
The report says that there are several main factors at play in the sales market currently, including the balance between buyer demand and the supply of homes being put up for sale, which differs across the country.
‘Certainly, the disconnect in some UK towns and cities between rising demand, on the back of stronger economic growth and muted stock levels, is contributing to price growth,’ it explains, adding that stamp duty remains a curb on transactions.
However, it points out that in prime central London, some parts of the market are moving into positive price growth for the first time in nearly two years. The trend is becoming particularly apparent in areas where lower prices more fully reflect higher stamp duty charges.
On a more regional basis, the North/South divide in price growth has narrowed, with the Midlands, East of England and North West seeing stronger growth and activity levels than the traditional property powerhouses of London and the South East, although large discrepancies in capital values remain.
The report also suggests that Brexit will continue to create uncertainty in the short term. ‘And while interest rate rises will push up mortgage rates, the rates payable on home loans will remain near historic lows in the short to medium term,’ it adds.
But one of the biggest factors in the market at present, according to the analysis, is the growing affordability pressures in some parts of the country. ‘These will weigh on pricing. In the lettings market, rental growth has been slowing for a year. However, as with the sales market, rental performance is dependent on the type of property, as well as its location,’ it concludes.