Average house in Britain ‘to cost over £370,000 by 2026’ as property prices set to increase by more than £40,0000 over next five years
- The average UK house price is estimated to rise by more than £40,000 by 2025
- Forecast by Savills predicts the north-south property price divide will also shrink
- Central London is still expected to outperform prime and mainstream markets
- Changes in working patterns also expected to underpin demand for rural areas
The average house in Britain will cost £370,000 by 2026 with property prices set to increase by more than £40,000 over the next five years.
Estate agents Savills, publishing a five-year forecast, has estimated that the typical UK property value will increase from £327,838 in 2021 to reach £370,785.
The property group also expects the north-south divide in property value to continue to shrink over the next five years.
This has been attributed to affordability constraints in London, where house prices are already high compared with elsewhere in Britain, and which are expected to keep a lid on price growth.
However, after a longer period of sluggish growth, Savills expects that prime central London will outperform other prime and mainstream markets.
A Savills for sale sign in Portland Road, Notting Hill, in the Royal Borough of Kensington and Chelsea, west London. The agents predict average house in Britain will cost £370,000 by 2026
Research by the estate agent shows the transactions and growth in the mainstream housing market between January 2020 and September 2021
An aerial view of houses in Yeovil. Changes in working patterns are expected to underpin a demand for properties in rural areas
Lucian Cook, head of residential research, said: ‘With the prospect of inflationary pressures persisting into next year, bringing forward the first anticipated interest-rate rise, we expect price growth in the near term to be somewhat more muted than we have seen of late.’
‘With gradual interest-rate rises expected, we expect the mortgage regulation introduced back in 2014 to show its hand more clearly over the next five years.
‘Stress testing of affordability has meant that existing borrowers are unlikely to get into financial trouble as rates creep up.
‘But it will cap how much new buyers can borrow relative to their income in a higher interest-rate environment, acting as a drag on both prospective price growth and market activity over our forecast period.’
Lawrence Bowles, director of residential research, added that London has become ‘increasingly confined to more affluent households’.
He said: ‘Given where we are in the housing market cycle, the north-south divide in house prices looks set to close further over the next five years.’
‘There remains more of an affordability cushion beyond London and the south. The Government’s levelling up agenda has the potential to accelerate a rebalancing of the market, but only if it gains meaningful traction.’
‘The potential for price growth looks more constrained in the London mainstream market, which has become increasingly confined to more affluent households.
‘This reflects the extent to which London prices became dislocated from the rest of the UK housing market through strong price growth from 2005 to 2016, something so pronounced it is expected to still limit price growth across large parts of the capital a decade later.’
Savills said that, by contrast, the prime central London market continues to offer ‘good value for money’ in a historical context, and is expected to benefit from an increase in overseas demand as international travel picks up.
Frances Clacy, research analyst, said: ‘We’ve already seen the beginnings of this recovery, primarily driven by demand for larger houses and, as such, by locations such as Notting Hill and Holland Park.
‘But renewed demand for flats during the second half of 2021, particularly from those looking for a pied-a-terre, suggests growth is likely to become more balanced, both in terms of location and property type, going forward.’
The estate agent expects to see changes in working patterns underpin demand in more rural areas further away from major employment centres, albeit to a lesser degree than over the past 18 months.
Here are Savills’ mainstream residential forecasts, with the average house price in 2021, the predicted percentage increase over the coming five years, and the predicted average house price for 2026:
– North-west, £229,572, 18.8%, £272,732
– Yorkshire and the Humber, £224,257, 18.8%, £266,417
– Wales, £212,912, 18.2%, £251,662
– North-east, £181,001, 17.6%, £212,857
– East Midlands, £252,943, 15.9%, £293,160
– West Midlands, £264,697, 15.9%, £306,784
– Scotland, £198,998, 15.9%, £230,639
– South-west, £341,971, 13.1%, £386,769
– South-east, 10.4%, £485,553
– East of England, £380,685, 10.4%, £420,276
– London, £676,124, 5.6%, £713,987
– Britain, £327,838, 13.1%, £370,785
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