Next year’s general election in the United Kingdom is expected to influence the direction of the housing market significantly in the coming year, according to Knight Frank’s forecast for the UK Housing Market.
The will be especially true in central London, but the agent predicts that growth will get back on track over the next five years to 2019.
The real estate firm says that average U.K. house prices will rise by 3.5 percent during 2015, and that cumulative growth in U.K. prices will total 18.2 percent 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 percent by the end of 2019, it notes.
It also predicts that U.K. rents and prime central London rents will rise 2.2 percent and 3.5 percent respectively during 2015.
Interest rate rises and the risk of a renewed economic slowdown represent the biggest risks to the U.K. housing market, is cautioned.
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.”
Nicholas Holt, Asia Pacific Head of Research, added: “Political uncertainty tends to foster a wait-and-see environment in the lead up to national elections. This year we have already witnessed a pre-election slowdowns in residential markets in Indonesia, India and New Zealand, followed by a pick-up in activity shortly afterwards.”
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.
“This rising appetite for property comes against the continuing shortage of new housing stock in the U.K., putting strong upward pressure on prices in some areas,” explained Grainne Gilmore, Head of U.K. Residential Research.
“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.
Main photo by David Iliff. License: CC-BY-SA 3.0
Knight Frank London Research 2015
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg
