Housing markets in the regions are set to overtake London as the impact of interest rate rises and increasing regulation bites, according to Savills.
After a period of very strong recovery, affordability constraints and mortgage regulation are beginning to slow the annual rate of house price growth. These factors, combined with interest rate rises, will cap the potential for further growth, the real estate advisor says.
The firm forecasts that average house prices will rise by 19.3 per cent in the five years to the end of 2019. However over 2015 it expects price growth of just 2 per cent.
Savills spokesperson Lucian Cook comments: “Stress testing of borrowers’ ability to service a mortgage and loan to value lending caps will increasingly limit the amount buyers can borrow, making it more difficult to access or trade up within the market.
“Not only will this suppress price rises, particularly in London, it will also reduce the potential for transaction volumes to return to anything close to a pre-crunch norm.”
London growth is expected to peter out after the end of a stellar 2014. The market now looks relatively fully valued and this has already prompted a change of sentiment among buyers. Savills is therefore forecasting that mainstream London house prices will flatline next year, and will grow by just 10.4 per cent over five years – the least of any region.
By contrast, the South East and East of England are expected to show the strongest growth, at 26.4 and 25.2 per cent respectively, as buyers priced out of London seek relative value beyond the capital.
At the other end of the scale, the North of England has greatest capacity for growth based on affordability measures, but the strong economic drivers are not in place to support it.
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