Yorkshire and the North West look set to see the UK’s greatest house price growth over the next five years, according to the latest, revised figures from Savills. Both regions are expected to record an increase of 18.8 per cent between 2022 and 2026 with prime property at the top end of the market rising by 19.3 per cent. Wales is third in the table with 18.6 per cent and the North East fourth with 17.6 per cent.
This outstrips the 5.6 per cent and 10.4 per cent expected in London and the South East, respectively. The UK average forecast is 13 per cent. The predictions for Yorkshire and the North West show a 4.5 per cent rise in 2022; 4 per cent in 2023; 3.5 per cent in 2024; 3 per cent in 2025 and 2.5 per cent in 2026. This would take the average house price in Yorkshire from £224,257 to £266,417 over the next five years.
Analysts at Savills believe the average UK house price growth next year will be 3.5 per cent as robust economic growth and a shortage of homes available to buy continue to support prices. Housing transactions are expected to fall back to normal levels after 2022, after hitting a projected 1.5m in 2021.
Meanwhile, increases to interest rates are likely to act as a drag on the amount households can borrow relative to their income. Strongest growth will be seen at the top end of the property market due to less reliance on borrowing. The Savills forecasts assume that the Bank of England raises rates twice in 2022, slowly raising them to 1.5 per cent over the next five years before plateauing at 1.75 per cent at the end of 2027.
Lucian Cook, head of residential research at Savills, says: “After such intensity in the market and without the imperative of a stamp duty holiday, we know that there will be less urgency in the market from 2022. Indeed, we have already seen three-month on three-month house UK price growth slip back from 3.9 per cent at the end of June to 1.7 per cent at the end of September. With the prospect of inflationary pressures persisting into next year, bringing forward the first anticipated interest rate rise, we expect price growth in the near term to be somewhat more muted than we have seen of late.”
He adds that regulations that now demand stress testing of affordability has meant that existing borrowers are unlikely to get into financial trouble as rates creep up. However, this will cap how much new buyers can borrow relative to their income, acting as a drag on both prospective price growth and market activity over the next five years.
Ed Stoyle, head of residential sales at Savills Yorkshire, believes that while there is likely to be less urgency in the market next year, demand for property in popular towns and villages in God’s Own County looks set to continue.
He says: “After such intensity in the market and without the imperative of a stamp duty holiday, we know there’s likely to be less urgency from 2022. “As a result, coupled with the first anticipated interest rate rise, our researchers expect price growth in the near term to be somewhat more muted than we have seen of late. However, based on the historically low number of homes coming to the market, combined with relatively low unemployment rates and a robust economic performance across the region, we simply expect to see softer growth rather than prices falling.
“Yorkshire has experienced above average increases in house price growth for the past five years or more and it continues to lead the way with the strongest growth predicted of all UK regions, alongside the North West. Whilst house price growth in the south has led the way in years past, Yorkshire’s appeal and demand for housing in the county has an increasing role to play.”
He adds that pandemic-induced changes that now allow many more people to work from home on a full-time or a part-time basis have boosted Yorkshire’s appeal among home hunters, including a growing throng from outside the area who have been lured here by TV series like Our Yorkshire Farm (Read more)and All Creatures Great and Small.
“The regional increases we are predicting remain greater than those forecast for properties in London, and we still expect changes in working patterns to underpin demand in more rural areas, albeit to a lesser degree than over the past 18 months,” says Ed. “With its connectivity to London and Scotland, excellent schooling, variety of high quality housing stock and access to lots of green space and open countryside, Yorkshire has always been and will continue to be a popular choice for a wide number of buyers both from within the county and from further afield.
“A shortage of available properties on the market also means that homes in the most popular towns and villages will continue to be in high demand. Plus, there will always be areas that buck the trend and perform better than the wider forecasts.”
Before sellers get carried away, Ed warns: “Setting a realistic asking price from the start will be key to maintaining momentum as we move into the new year.”