London to lag behind in house price growth
London house price rises are set to lag behind the UK as a whole over the next decade, according to a new report.
The capital has for many years been one of the hottest growth spots in the British economy, with the high general demand for property in the capital and specific niche markets like international investment in the prime west-central area pushing up the average.
However, estate agency Savills has predicted that the capital will only see price growth of seven per cent over the next five years, compared with 14 per cent for the rest of the country. Indeed, the hottest market will be in the north-west, with price growth of 18 per cent.
London's situation will be a diverse one, with the prime markets remaining strong. Elsewhere, however, the market will face a period of correction, with prices dropping two per cent next year before starting to rise again in the 1919-20 financial year.
This will, in turn help keep the rental market on the rise, as those choosing this option over buying will increase. The projection is for rental rates in London to increase by 17 per cent, in line with wages. By contrast, the rest of the country will see smaller rent rises.
Key factors in the slowdown will be increases in the base rate and their consequent impact on mortgages, plus Brexit fears and the issue of affordability.
The first factor will, of course, affect people all over Britain, while the second may hit the country at large but London more than most, should there be an exodus of firms from the city. The last, however, is a much bigger factor in London, where the typical home is priced at 12.9 times average annual pay, compared with a salary multiple of 5.6 in the north west.
Savills Research analyst Lawrence Bowles observed: “London’s housing market has been pushing up against the limits of mortgage regulation and affordability for some time.
“The Brexit vote was the tipping point that slowed price growth. Weakened sentiment combined with expected interest rate rises now point to small, short term price falls next year."
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