“It is good for government, the economy, buyers, sellers and industry participants. But it will take some getting used to,” according to JLL, which predicts house price growth averaging 2.5 per cent a year for the next five years.
It admits that this steady rise will not excite investors, homeowners or developers looking for big gains but say it will lay the foundations for a less volatile UK housing market in the medium-term.
The report reveals that regional city centres are expected to outperform the rest of the UK market with higher sales prices and rental growth as the rise of city centre living continues.
It picks Leeds as the standout market to watch for rental growth between 2018 and 2022, saying: “City living has gained strong momentum in Manchester, Liverpool and Leeds over the past three years and, together with an active student market, has pushed demand in both the sales and lettings markets notably higher.
“With housing supply in these city centres severely constrained, prices and rents have soared. Despite these strong increases we still anticipate further upward pressure over the next five years.
“Growth rates may not be as strong as the past three years but uplifts of three to four per cent per year are both significant and higher than UK averages.”
JLL’s economic forecasts for Northern England say that Manchester is set to be” the shining beacon” with Leeds not far behind.
The Manchester economy is predicted to expand by an average 2.7 per cent per annum, well above regional and national averages. Leeds is predicted to grow by two per cent and Liverpool 1.8 per cent, all above the 1.7 per cent Northern England average.
Employment growth is also forecast to be stronger, especially in Manchester, which is expected to see jobs growth averaging 1.3 per cent per year between 2018-2022, four times the regional average. Liverpool and Leeds should see annual average growth rates of 0.4 per cent and 0.6 per cent respectively.
JLL say that the build to rent market in Leeds is one of the most active across all of the UK’s city centres, with demand fuelled by young professionals and affluent students.
There are 3,500 build to rent properties and a further 2,000 private sale apartments in the short-term development pipeline. Just under 1,000 build to rent apartments are under construction and include Dandara’s 744 apartments at Sweet Street West and Grainger’s 242 flats on the site of the former Yorkshire Post building. The SOYO regeneration scheme, which includes 515 apartments, is expected to start on site this spring.
The JLL report predicts average rental value growth of 3.5 per cent per year over the next five years and adds “This forecast makes Leeds city centre our standout market to watch for rental growth between 2018 and 2022.”
The average price of a two bedroom flat in Leeds increased by 2.8 per cent in 2017 to £185,000 but JLL expects stronger price growth in the city over the next five years to average of 3.7 per cent per annum, second only to Manchester at just over four per cent.
The reports adds: “There is a strong appetite for high quality owner occupier stock in Leeds. We expect demand to significantly outstrip available supply over the next five years.”