House prices are expected to rise 14.8 per cent during the next five years, according to estate agents Savills, adding £32,000 to cost of the average home in England and Wales.
However, values in the North West are predicted to rise by 21.6 per cent while those in London and the South West are expected to increase by only 4.5 per cent and 9.3 per cent respectively.
Savills has scaled back its predictions for London amid changing conditions in the housing market – with growth in the North and Midlands reversing some of the North-South property divide.
The 4.5 per cent predicted growth in house prices in London between 2019 and 2023 is in sharp contrast to the prediction that the estate agent made last year.
Back then, it predicted that values in the capital would rise by 7.1 per cent in the five years to 2022.
Higher average prices in London and the South East mean that many homes are no longer affordable for borrowers, particularly those on an average wage.
It is this affordability issue rather than Brexit that is limiting the growth in house prices in the long term, Savills said.
Lucian Cook, Savills head of residential research, explained: ‘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.’
Savills reveals the average value of a home in Britain is expected to rise 14.8 per cent
London house prices have risen by 72 per cent in the past decade, with the average buyer with a mortgage now paying £429,000 and having a household income of almost £76,000.
Even with borrowing at more than four times income, these households still need a deposit of £123,000.
However, Savills went on to predict that the top end of the market in London would increase by significantly more. This is due to it being less dependent on mortgage borrowing.
The highest price growth is expected in areas where prices tend to be lower.
Lower prices in the Midlands, the North of England, Yorkshire and Humberside, Scotland and Wales mean buyers are able to increase their borrowing relative to their income, even allowing for higher interest rates.
This will support price growth ranging from 17.6 per cent to 21.6 per cent across the regions, Savills predicted.
House prices in London are expected to grow 4.5 per cent between 2019 and 2023, with this three-bed house in Wandsworth on the market for £779,950
The sale of the Wandsworth property is being handled by estate agents Dexters
Savills also predicted a growth in rents in the next five years, averaging an increase of 13.7 per cent for the country as a whole and 15.9 per cent in London.
It would see typical rents for a two-bedroom property rising from their current level of £793 to £902 by 2023. In London, the rise would be from £1,572 to £1,822.
Savills attributed the increase in rents to a tightening of access to mortgage finance and limited housing supply.
It follows figures released by Nationwide Building Society yesterday that showed house prices across Britain are rising at the slowest pace since May 2013, as worries over Brexit, the economy and squeezed household finances take their toll.
In the year to October, the average cost of a property across the country rose by 1.6 per cent, down from the 2 per cent year-on-year growth recorded in September.
Britain’s biggest building society said that house prices were flat last month, although the cost of the average home dipped by almost £500, from £214,922 in September, to £214,534 in October.
Nationwide said it still expected property values to rise this year, but only by a minimal 1 per cent.
The Bank of England kept interest rates on hold at 0.75 per cent yesterday, but said that while they could be cut in the event of a no-deal Brexit, it may also have to raise them.
|2019||2020||2021||2022||2023||5 year 2019-2023|
|Yorkshire & Humberside||2.50%||5.50%||4.00%||3.00%||4.00%||20.50%|
|East of England||0.00%||2.00%||2.50%||2.00%||2.50%||9.30%|