House prices in the UK are likely to see a steady rise of 5% in 2017 but London will no longer be the driving force behind property growth, according to a new analysis report.
Indeed, the prime central London property market is expected to be static during the year and could even see prices fall by as much as 5% over the next 12 months, says the report from agents Strutt & Parker and economic forecasters Volterra.
Looking ahead over the next five years, the forecast predicts house price growth of 4% in 2018, 2019, 2020 and 2021, resulting in cumulative growth of 23%. Its best case scenario for the prime central London market is flat for 2018, them much stronger 8% growth for the three years after that, taking the five year growth to a much healthier 26%.
However a worst case scenario could see prices in central London fall by 5% in 2018 as well as 2017 but then picking up again by 4% over the next three years to a cumulative rate of just 2%.
The lettings market in prime central London is forecast to be flat in 2017 as well, then rising by 2.5% in 2018 and 4% in the following three years to a cumulative 15% by 2021.
What scenario will play out will depend on upcoming global events in 2017 generating volatility along with rising inflation, potentially rising interest rates and a shortage of housing stock in the UK, according to Vanessa Hale, partner in research at Strutt & Parker. She expects that the shortage and continued high demand will continue to keep house prices stable in London with a slight uptick across the UK.
The report points out that according to the Nationwide House Price Index property prices grew 4.5% during 2016 overall and historically London has been the driving force of UK prices, but this changed during 2016. Whilst London achieved growth of 3.6% over the year, the region was outperformed by eight of the 12 other regions, most notably East Anglia with growth of 10.1% and price growth in London dipped below the UK average in 2016 for the first time in eight years.
‘Whilst Brexit headwinds still exist the country is getting back to business as usual. The lack of housing supply and strong demand will continue to drive pricing up, though perhaps in single digits,’ said Guy Robinson, head of regional residential agency at Strutt & Parker.
There has been a similar pattern for sales. Transaction volumes in the £2 million plus property market which remained relatively steady in 2016 compared to 2015, with the South East showing the highest level of activity with over 600 houses sold in 2016.
But in the prime central London market at this level sales in 2016 were down nearly 25% compared to 2015. The report points out, however, that there was a slight pick-up in transactions during the final two quarters of 2016, but levels remain considerably below the five year average.
With more incidences of sellers prepared to review pricing and consider reasonable offers in the prime central London market it may now have found a level which may provide a boost and Strutt & Parker data for the fourth quarter of 2016 showed a small uplift of 4.6% in British buyers in the sector when compared to the same period last year.
The report points out that the current economic conditions and the extra 3% stamp duty on additional homes introduced in 2016 are also having an impact on the lettings market in prime central London. There were nearly 11,000 property lets agreed in 2016, down 31% compared to 2015 when nearly 16,000 property lets were agreed.
‘The lack of new tenancies in prime central London year on year reflects the uncertainty in the market following Brexit. Our tenant profiles show that over 40% of our tenants are European and those tenants are simply renewing and staying put to see how Brexit unfolds,’ said Kate Eales, national head of lettings at Strutt & Parker.
Reference: http://www.propertywire.com/news/uk/london-will-no-longer-driving-force-uk-property-prices-2017/
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