• Kevin Murphy

UK Prime Markets Predictions for the Next Five Years

Reports of a cabinet mutiny regarding Prime Minister Teresa May’s Brexit plan continue to be reported but what will this turmoil mean for the local British markets in particular housing? Savills is reporting that for the prime residential in central London could delay a prime housing recovery for London by as much as 18 months.

However a recovery could be in the future by 2021 in a five year forecast according to a Savills analysis released by Propertywire..

The report states that prime central London residential prices could decline by 5% in 2018 and another 1% by 2019 and remain stagnant in 2020. An increase of 6% could occur in 2021 followed by 2% and 5% for the years of 2022 and 2023 respectively.

The desirability of London continues as a place for property investing and as a place to live with the Savills report stating that office take up continues to indicate the popularity of London for a wide range of business opportunities continues.

Outside greater London prices are expected see declines by 1.5% for 2018 and another 1% for 2019. Similar to central London prices for 2020 outside the city will remain flat. A rise of 3.5%% is predicted for residential prices is expected for 2021, a 1% increase in 2022 and 3.5% rise for 2023.

In the outer London market the forecast is for prices to fall by 1.5% this year and by 1% next year, remain flat in 2020 before rising by 3.5% in 2021, by 1% in 2022 an by 3.5% in 2023.

Prices for the areas beyond the commuter market of London have become popular as property valuations are seen as more of bargain when compared to London.

Savills reports:

‘A property bought for £1 million in prime central London in 2007 is now worth £1.37 million, compared to £1.28 million in outer prime London, £1.15 million in the suburbs, just £911,000 in the Midlands and the North and £876,000 in Scotland.’

For Britain and Wales prices are predicted to remain flat with perhaps an increase of 1% for 2019 and an increase of 2% in 2020. An additional increase of 3% for 2021 and 2022 and 4.5% in 2023. Prices in Scotland should increase by 2% for the year 2018 through 2019 and increase 3% for 2021 and an additional 3.5% for 2023.

Lucian Cook, Savills head of residential research told Propertywire:

‘Historically, any recovery in the prime housing markets has been sparked in central London, with a strong bounce in values, with double digit annual growth not unusual. The catalyst has often been a currency advantage, though prime central London residential property also has to look identifiably good value on a world stage.’

‘This time around we’ll also need a backdrop of greater certainty, which we expect by the end of 2020, clearing the way for values to rise. However, a number of constraints, including rising borrowing costs, increased taxation, higher investment returns on competing assets and a general election in 2022, point to a slower rate of recovery than in previous cycles.’

Caution by buyers can be expected according to Savills as a result of a proposed additional stamp duty of 15 to 3% for non-UK buyers and investors.

Overall global wealth continues to be robust with the ranks of the ultra wealthy expected to increase 40% in the next five years.

Mr Cook:

‘Despite successive stamp duty increases, London remains mid table compared to other leading world cities in terms of buying and selling costs. The proposed surcharge will not substantially change that, rather it’s a clear signal to those still hoping to see a rate cut at the top end of the market that the higher rates are here to stay.’

‘There will obviously be competition from increasing returns from other asset classes, but the rational is only part of the story. Those buying the most expensive homes in central London are often less concerned about rental yield and total return, but driven by the appeal of owning a piece of prime real estate in what is widely seen as a great city to live.’

The prediction for the next five years is for the markets South, Midlands, North of England and Scotland will edge out London as affordability will be the key issue.

The markets are also expected to be price sensitive for needs based purchases until Brexit negotiations reach a conclusion.

Lucian Cook predicts:

‘Buyers see that the price gap between London and the country markets has probably stopped growing, so are more willing to sell up and make the move out. But rather than extending their borrowing, many are looking to buy a bigger home and potentially reduce their mortgage at the same time, capping price growth at the relatively modest levels we are forecasting.’

‘Our five year projection may look ambitious at this moment of peak uncertainty, but it looks pretty modest when viewed against history. And history tells us that when prime central London house prices bounce, the speed of that bounce can take the market by surprise.’

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