House prices in the north-west of England will grow six times faster than in London over the next five years, Savills claims.
The agent has released its latest five-year price forecast for the housing market, with quite a few caveats.
The figures are based on an assumption that the General Election does not result in a significant shift in policy environment, that the UK ultimately achieves an orderly exit from the EU over the course of 2020, and avoids recession.
It also assumes that the bank base rate increases gradually to 2% by the end of 2024, constraining mortgage affordability and therefore house price growth.
With all that in mind, Savills predicts that first-time buyer numbers will slip back when Help to Buy is withdrawn. A new scheme is being launched in April 2021 with regional price caps that will run until April 2023.
Despite this, Savills forecasts that transactions will remain at around 1.2m, with cash buyers representing around a third of the market.
Overall, the agent expects UK house prices to rise by an average of 15.3% over the next five years to average £266,000 in 2024.
It is predicting a 0.5% increase this year, 1% in 2020, 4.5% in 2021 and 3% in 2022 , 2023 and 2024.
The north-west is forecast to see the strongest price growth at 24% between 2020 and 2024, attributed to “the strength and diversity of the regional economy and the capacity for higher loan to income borrowing”.
This will be followed by 21.6% growth in Yorkshire, 18% in Wales and 20% in Scotland, Savills said.
In contrast, average house prices are expected to increase by just 11% across the south and east of England and 4% across Greater London.
Savills said this was because these regions have already previously outperformed the rest of the UK.
Lucian Cook, head of residential research for Savills, said: “We anticipate a continuation of trends seen historically, where London and the south-east underperform markets in the midlands and north.
“This stage of the cycle appears to have begun in 2016, coinciding with the referendum, when London hit up against the limits of affordability.
“Markets further from the capital, such as Leeds, Liverpool and Sheffield, were much slower to recover post financial crisis and have much greater capacity for house price growth relative to incomes, even as interest rates rise.”
The agent also predicts that prime central London will, however, rebound and rise 3% next year, the first annual price growth since 2014, and increase 20.5% over the next five years.
Cook added: “PCL has become increasingly dislocated from the Greater London mainstream over the past five years; we expect that to go into reverse.
“Historically, a recovery in the prime markets has been sparked in prime central London, when the city’s most expensive properties start to look good value on a world stage.
“Values have been bottoming out over the past year, resulting in a build-up of new buyer registrations over recent months. Both signal that the market is set for a bounce, but this is being held up by uncertainty.”
| 5-year mainstream house price forecasts | 2019 av house price £ | 2019 est | 2020 | 2021 | 2022 | 2023 | 2024 | Total5 year growth | 2024 av house price £ |
| UK | 231,000 | 0.5% | 1.0% | 4.5% | 3.0% | 3.0% | 3.0% | 15.3% | 266,000 |
| North West | 169,000 | 4.0% | 2.5% | 6.5% | 4.5% | 4.5% | 4.0% | 24.0% | 210,000 |
| Yorkshire & The Humber | 165,000 | 1.5% | 2.0% | 6.0% | 4.0% | 4.0% | 4.0% | 21.6% | 200,000 |
| Scotland | 151,000 | 1.5% | 2.0% | 6.0% | 3.5% | 3.5% | 3.5% | 19.9% | 180,000 |
| North East | 131,000 | 1.5% | 1.5% | 5.0% | 4.0% | 4.0% | 4.0% | 19.9% | 157,000 |
| West Midlands | 205,000 | 3.0% | 3.0% | 5.0% | 3.0% | 3.0% | 3.0% | 18.2% | 242,000 |
| East Midlands | 194,000 | 1.0% | 3.0% | 5.0% | 3.0% | 3.0% | 3.0% | 18.2% | 229,000 |
| Wales | 165,000 | 1.5% | 2.0% | 6.0% | 3.0% | 3.0% | 3.0% | 18.1% | 195,000 |
| South West | 256,000 | -0.5% | 0.5% | 4.0% | 3.0% | 2.5% | 2.5% | 13.1% | 289,000 |
| South East | 321,000 | 0.0% | 0.0% | 3.0% | 2.5% | 2.5% | 2.5% | 10.9% | 357,000 |
| East | 291,000 | 0.0% | 0.0% | 3.0% | 2.5% | 2.5% | 2.5% | 10.9% | 323,000 |
| London | 462,000 | -2.5% | -2.0% | 1.5% | 1.0% | 1.0% | 2.5% | 4.0% | 480,000 |
By MARC SHOFFMAN
Source: Property Industry Eye