Steady price growth of 2.5% forecast for UK mainstream property market in 2018
The mainstream UK property market is likely to see price growth of 2.5% next year but the weaker prime central London market is forecast to be flat in 2018, according to the latest outlook report.
However, zero growth in the prime central London market is the best case scenario and the sector could see prices fall by 5% as both sales and prices have continued to fall at the upper end of the market.
The forecast from agents Strutt & Parker does, however, suggest that looking further ahead, over five years prime central London price growth is set to outpace that of the UK as a whole. The forecast, compiled with economic forecasters Volterra, sees prices rising by 2.5% in the mainstream UK market in 2019 and then by 4% in 2020, 2021 and 2022, giving a cumulative rise of 18%.
For prime central London the firm give a best and worst case scenario. On the positive side it predicts price growth of 4% in 2019, 5% in 2020, and 6% in 2021 and 2022, totalling five year growth of 23%. But in the worst case scenario prime central London prices could be flat in 2019, rise by just 1% in 2020 and then by 2% in 2021 and 2022. Adding this on to the fall of 5% in 2018 this means over the five year period prices would be flat.
However, the lettings market in prime central London is forecast to be steady with a 1% rise in 2018, a rise of 1.5% in 2019, a rise of 2% in 2020 and a rise of 2.5% in both 2021 and 2022, totally five year growth of 10%. The report points out that the first rise in interest rates for a decade is expected to have an impact on mortgages, which will be compounded by a further year of limited wage growth combined with inflation.
London, which has traditionally experienced the strongest growth rates in the UK, has been the worst performing region in 2017, with a negative growth rate of 0.6%. Prime central London prices have declined for the third consecutive quarter of 2017 with quarterly decrease of 1%, following a 1.2% decrease in the second quarter.
The report says that this means prices have fallen around 3% so far in 2017 and are down by 5% compared to the same time a year ago. However, it is worth noting that London house prices are still 54.6% above their 2007 peak.