What does the future hold for the housing market? Sharon Dale takes a look at the latest forecasts.
Predicting what property prices will do next is tricky, especially in a time of economic uncertainty. But experts have crunched the numbers, gazed into their crystal balls and most have come up with forecasts that point to a period of small gains with the north outperforming London and the south east.
The brightest outlook comes from PwC, which believes we will see average UK house prices rise by an annual four per cent a year until 2025. Business consultancy Morgan Stanley has the gloomiest prediction of a 1.6 per cent drop in values next year and more to come as Brexit approaches.
Jackson-Stops thinks that prices will remain flat in 2018, with stamp duty, Brexit and political uncertainties taking their toll on the market. It adds that higher value homes over £1million are continuing to feel the strain of stamp duty.
“Prohibitive levels of stamp duty land tax have been a real drag on the UK property market over the last financial year and although the Treasury will be pleased to see SDLT receipts have generated £8.6billion in revenue on residential transactions, sales levels fell by eight per cent,” says Nick Leeming, chairman of Jackson-Stops.
Savills foresees a slow 2018 with values in London falling by two per cent and edging up by just 0.5 per cent in the south east. Yorkshire, the north west, north east and Scotland are its top performers with gains of 1.5 per cent. Its five-year forecast is also good news for northern homeowners and Yorkshire could see prices rise by 17.6 per cent by the end of 2022, which is more than double the rate in London, which is expected to be seven per cent. The north west, buoyed by economically vibrant Manchester, is predicted to see the greatest growth with an 18 per cent increase in prices.
Knight Frank expects average UK house price growth to be one per cent in 2018, reaching 14.2 per cent by 2022. In London, prices are forecast to fall by 0.5 per cent in 2018, but cumulative growth over the next five years is positive at 13.1 per cent. Its figures for Yorkshire are not as optimistic as Savills and show a one per cent gain next year, followed by a two per cent rise in 2019 and three per cent in 2020, 2021 and 2022 – bringing the total price growth of 12.6 per cent over the five-year period.
A spokesman says: “The momentum in house price growth is slowing in many parts of the country, and we expect price rises to remain muted overall next year amid increased economic and political uncertainty in the run-up to Brexit and amid more muted forecasts for wage growth. The market is localised and we see slightly stronger growth in the Midlands, east of England and the north west, a continuation of the trend that has emerged this year. Once the Brexit deal is completed, we forecast rising momentum across the market, with price growth in many locations.”
He adds that while affordability pressures and property taxes will continue to weigh on pricing, the shortage of new homes is unlikely to be reversed in the coming years and that will underpin pricing.
Over at Strutt and Parker, analysts say the mainstream UK property market is likely to see price growth of 2.5 per cent next year, while weaker prime central London prices will be flat. Their long-range prediction shows values rising by 2.5 per cent in the mainstream market in 2019 and then by four per cent in 2020, 2021 and 2022.
Countrywide chief economist, Fionnuala Earley, who believes that average values will rise 2.5 per cent in 2018, says that the short supply will support house price growth.
Almost all the experts concur that a lack of homes for sale will continue to be a feature of the property market next year.
JLL also believe that sales will slow, averaging 1.23 million per annum over the next five years, though on a positive note, it says that house building starts are set to remain buoyant, averaging 206,000 per annum between now and 2022.
It believes that rental sector expansion is inevitable, thanks to the growing number of people priced out of the property market.
*See our January 7 edition of Property Post for predictions from Yorkshire experts.