North-south property trend will be reversed over next five years, according to Savills

This article is more than 1 year old

This article is more than 1 year old

House prices are forecast to rise strongly in northern England, the Midlands, Wales and Scotland over the next five years, far outstripping London’s single-digit rate and reversing the trend of previous decades, according to a report.

Savills, the upmarket estate agent, predicts that prices will increase fastest in north-west England over the next five years, at 21.6%.

Other areas where Savills forecasts above-average growth are Yorkshire & Humberside (20.5%), followed by the east and west Midlands and Wales ( 19.3%), Scotland (18.2%) and the north-east (17.6%).

By contrast, London prices are forecast to rise 4.5%, although prime central London is set for 12.4% growth, as the top end of the housing market bounces back from the price declines seen in recent months.

House prices across the UK are expected to climb by 14.8% on average between 2019 and 2023. This increase would add about £32,000 to the average house price by the end of 2023, taking it to £248,086.

Savills said that stricter mortgage lending rules introduced in the aftermath of the 2008 financial crisis would limit price increases but would also protect the market from a crash.

The return to growth in London overall will take far longer than expected, with buyers struggling to afford purchases and interest rate rises expected to occur earlier than previously assumed.

Savills forecasts that London house prices will fall 2% this year. They are expected remain flat in 2020 before rising by 2.5% in 2021. A year ago, it was predicting a flat outcome in 2019 and 5% price growth in 2020.

This reverses the trend stretching back to the 1980s for house prices in the capital to grow at a faster rate than the rest of the UK. In the past 1o years, London values rocketed nearly 67%, putting it far ahead of all other regions.

Property price growth in the south-east and east of England will also lag behind the UK average in the next five years, with a forecast of 9.3% growth for each region. There is likely to be a 12.6% increase in the south-west.

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Lucian Cook, Savills head of residential research, said: “Brexit angst is a major factor for market sentiment right now, particularly in London but it’s the legacy of the global financial crisis – mortgage regulation in particular – combined with gradually rising interest rates that will really shape the market over the longer term.

“That legacy will limit house price growth but it should also protect the market from a correction.”

The forecasts come a day after a report from Nationwide, Britain’s biggest building society, showed that UK house prices are rising at the slowest annual pace in more than five years.

The average property value rose 1.6% in October to £214,534 from a year ago, down from September’s 2%, and the lowest annual growth rate since May 2013.

The squeeze on household budgets and the uncertain economic outlook is likely to have dampened demand, even though borrowing costs remain low by historic standards and unemployment is at 40-year lows, Nationwide said. It still expects house prices across the UK to rise by about 1% this year on average.

