The General Election will influence the direction of the housing market significantly, in the coming year, especially in central London, but growth will get back on track over the next five years to 2019, according to Knight Frank’s forecast for the UK Housing Market.
- Average UK house prices* will rise 3.5% in 2015
- Cumulative growth in UK prices will total 18.2% in the five years to the end of 2019
- While prices in prime central London will remain unchanged in 2015, cumulative growth will total 22.1% by end of 2019
- UK rents and prime central London rents will rise 2.2% and 3.5% respectively in 2015 – Interest rate rises and the risk of a renewed economic slowdown represent the biggest risks to the UK housing market
Liam Bailey, Head of Residential Research, said:
“We stated last year that positive price growth was set to become a national story, with the ripple from London a well-established trend. We noted at the time that there was a flip-side to this development. Strengthening price growth in the short term would act to limit longer term growth.”
“We remain of the view that pricing in the UK is high in historic terms and affordability constraints will limit future price growth, especially as we move into a more normal period for price growth. However, with the UK economic recovery continuing to gain traction and with positive real wage growth increasingly likely over the next five years, we believe there is scope for sustained price and rental growth beyond 2015.”
The forecast cites the “ultra-low” base rate in recent years as an accelerant on demand, especially among home-movers and buyers who have amassed a deposit and can lock into low-rate fixed mortgages, ensuring their monthly payments will not rise for two or five years or even longer.
Grainne Gilmore, Head of UK Residential Research, said:
“This rising appetite for property comes against the continuing shortage of new housing stock in the UK, putting strong upward pressure on prices in some areas.”
“This has been especially evident in London, where both the fundamental lack of supply of new homes and a lack of existing stock on the market have combined to deliver large double-digit annual growth in prices in some local authorities just outside the central areas.”
Construction activity has picked up markedly over the last year, but the Knight Frank forecast states that the large shortfall in the delivery of new homes in the coming years will maintain price levels in the coming years.